Growing up in an era of high economic uncertainty, individuals born between 1980 and 2000 are often identified as people who are unable to find meaningful work, partly out of desire and partly due to lack of opportunities, and always struggling with digital devices. They are individuals who have been somewhat ignored up to now by the financial industry which believes they have no assets to invest nor are they interested in building one. Our survey interviewed over 2.400 individuals with an average annual salary between $50.000 and $150.000 and what emerged is completely different from what you think and the asset management industry needs to get to know this new type of investor, who has very specific characteristics.
First of all, Millennials have their investment goals very clear in mind - over 60% of the interviewees declare it - and they already participate in financial plans to achieve them. But if on the one hand, being relatively young, they have investment horizons of no more than five years (in 64% of cases), probably because they are in that stage of life where important events (buying a house or building a family) could be around the corner and there could therefore be the need to have their assets available in a short time, on the other hand they are well aware of long-term needs and have started saving for their retirement. In fact, born and raised in a period of high economic uncertainty, with incomes potentially lower than those of their parents, Millennials need to make ends meet between what they can save for retirement and short-term needs.
For this reason, more than half of them assume a much more conservative behavior and give a preference for the preservation of assets rather than a search for higher performance. Also because, looking at retirement, the vast majority of Millenials are well aware of how much this is an abstract concept and of the fact that they will certainly not be able to count on public aid after the end of their working life. This is certainly one of the most relevant factors that affects the decision whether or not to join pension plans. However, about 60% believe that additional income for their retirement will also come from an inheritance, while 51% think that their children will contribute and help them. As was initially said, the stereotype outlines the interconnected Millenials more online than through interpersonal relationships.
However, when it comes to finance and investment decisions, the profile changes significantly. 86% of individuals surveyed in our survey say they trust financial advisors as much as they would trust themselves, a significantly higher percentage than the 39% who rely solely on social networks for financial matters. This means that when it comes to investing, even millennials prefer to be advised by a real person rather than a digital device. There are relatively few countries globally – mainly Canada, China and Japan – where millennials rely more on technology.
And the type of investment? In this context, there is some confusion between the preferences that emerge in terms of strategy and the ethical values that they would like their investments to express. Indeed, the survey reveals a preference for passive investments: chosen by 68% of Millenials because they are considered able to offer greater returns, by 60% because they are relatively cheap from a cost point of view and by 65% because they are considered less risky However, we believe there are many misunderstandings about what they can and cannot do. Passive investments, in fact, can offer high returns relative to the benchmark when the markets do well, but also offer comparable losses when the markets go down. Plus, they go against what Millennials believe in.
62% of respondents say passive investments can offer access to the best opportunities in the market, but this contrasts with 58% who acknowledge that passive funds, which hold all the companies in an index, they also include those companies that may not be compatible with their personal values. Indeed, for Millenials it is important that their assets be invested in instruments capable of doing good at a social level and therefore invest in companies that adhere to solid ethical principles and standards, or for example, that act ethically, have a positive social impact.
Therefore, the Millenials are not the kids that everyone believes, they are much more aware investors than everyone continues to think. But like all previous generations, they need to be helped and guided to achieve their long-term goals, especially considering the complex current landscape we find ourselves navigating. It is, therefore, necessary for the asset management industry to start considering them as such, to help them resolve misunderstandings regarding investments and to increase their financial literacy.
