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The CONNECT Blog

Charlie O'Flaherty | Head of Digital Strategy & Distribution

Crossbridge Capital

Millennials may be leading the next investment revolution

Millennials may be leading the next investment revolution

When Strauss and Howe coined the term millennials in 1987 to describe the generation born after 1980 they didn’t likely expect it to equate with the “me” generation. Today, however, the term evokes mixed characterisations of social savviness, laziness, desire for instant gratification, and often narcissistic, yet open-minded.

However, take a closer look, and many of these perceptions fail to stand up to scrutiny when we consider what they’ve already achieved. Especially in the information technology space. If you regularly use Facebook, Airbnb, Uber, Pinterest or Dropbox, you benefit from the work and imagination of entrepreneurs who are millennials. In fact, by 2020, the Me generation will make up an estimated 50 per cent of the global workforce and control between $19 trillion and $24 trillion on a global scale, according to consulting firm Deloitte.

This begs the question – how do millennials want to invest their money? They are the most digital-savvy investor group, 67 percent of whom are willing to utilise computer-generated recommendations (robo-advice) as their primary investing experience, versus 30 percent for Gen X’ers and Baby Boomers1.

Sadly, I’m not a millennial myself, but I would say members of this generation have grown up in a society far more diverse and embracing of diversity than preceding generations. Growing up in the age of digitalisation meant that their source of financial information extends beyond traditional channels onto social media, blogs and other online sources. This also creates a new DIY investment culture, where millennials are willing to step out of their comfort zone to explore options beyond traditional investment planners.

Another important point to note is that millennials in general have less disposable or investable income than their parents’ generation. This, coupled with their need to be in control of how they spend and where they invest their money, means there is a growing need for the most flexible, efficient, and price-friendly option to guide their investment strategies.

This is why robo-advisors have become more and more popular in recent years. Unlike traditional financial advisors, robo-advisors are less expensive options that appeal to the price-conscious crowd. The use of Actively Managed Certificates (AMCs) also creates more efficiency with more effective execution and no hidden fees.

This demographic has also largely been underserved by the wealth management industry because traditional wealth managers did not find it commercially viable to target them.

This demographic has also largely been underserved by the wealth management industry because traditional wealth managers did not find it commercially viable to target them. Adding a digital sales channel means it is now possible to reach out or better yet, relate to this audience. Robo-advisors can serve millennial investors with more modest balances because they leverage the efficiency that technology offers in addition to the insight and experience of human advisors. Also, millennials’ relationship with technology means they are more willing to delegate important tasks, making digital asset management more appealing.

From studies, we know that millennials are more reluctant than their elders to buy items such as cars, music and luxury goods. Instead, they’re turning to a new set of services that provide access to products without the burdens of ownership, giving rise to what’s being called a “sharing economy.”2 The must-haves for previous generations aren’t as important for Millennials. Instead, more than three in four millennials (78%) would choose to spend money on experiences or events over purchasing something desirable3.

With CONNECT you’re in complete control of the risk you’re willing to take to achieve your various goals.

When you extend this thinking to investment philosophy, there is a shift away from traditional benchmarking of a portfolio to a market index in favour of goals-based investing – an investment methodology where performance is measured by the success of investments in meeting an individual’s personal and lifestyle goals. With CONNECT you’re in complete control of the risk you’re willing to take to achieve your various goals. You may want to take on more risk to buy your dream home and less risk to fund your children’s education or your retirement. Different risk profiles for different goals.

The millennial generation knows what they want, and they are committed to getting it. They are looking at investments that are agile, flexible, cost-efficient and scalable to what they have, so they can meet their goals and live the experiences that they want.

  • 1Accenture Global Consumer Pulse Research, 2016
  • 2Goldman Sachs Global Investment Research
  • 3Millennials – Fueling the Experience Economy by Eventbrite and Harris

Charlie O’Flaherty is partner — head of digital strategy and distribution at Crossbridge Capital. The views expressed in this article are those of the author and not the author’s company. This material is provided for educational purposes and should not be construed as investment advice or an offer or solicitation to buy or sell certain securities.