Those born between the early 1980s and 2000 are now entering their prime working and spending years. Theyre the biggest generation in (US) history and as such, they will have a huge impact on, among other things, the investment world.
Lets take a look at some interesting facts and figures to get an idea of the financial millennial situation.
According to UBS, the millennial generation in the US could be worth as much as $24 trillion by 2020. A large part of this wealth will come from inheritance. As Mark Haefele, Simon Smiles and Matthew Carter from UBS write in their report: Looking ahead, this generation looks set to benefit from one of the largest intergenerational wealth transfers ever, carried out over a comparatively short timeframe.
In the United States alone, baby boomers are estimated to pass on about $30 trillion between 2011 and 2050. And as we saw in our investment themes for 2018 article, the wealth of Chinese millennials is expected to be somewhere between $19 trillion and $24 trillion between now and 2020.
Great news for the investment industry, right?
Not necessarily. A recent survey shows that the more affluent millennials are keen savers and that they generally are (a lot) more reluctant to invest their money in for example shares than previous generations.
Now, why is that?
The first thing that comes to mind is the financial crisis of 2008. Many of the young men and women from Gen Y saw their parents suffer big financial losses or even worse, go bankrupt. As a result, a lot of them developed an aversion to everything that sounded even remotely like stock markets and investments.
Perhaps as a (subconscious) consequence, millennials are much more focused on transparency and sustainability. In fact, they are much more concerned about the sustainability of their lifestyle choices in general than for example their parents were.
This is a mentality we see in the consumer products they buy, but also in the jobs they choose and hence the organizations they want to work for (or not) and the investment choices they make.
According to the UBS report mentioned above, 87% of millennials are likely to check the sustainability criteria of the products they buy. When it comes to their investments, theyre two times more likely to divest from a company if the latter doesnt meet sustainability practices.
So, what do they want to invest in then?
Thats the million dollar question. Rather than a specific asset category or product, there are several elements to take into account here:
Many Gen Yers dont invest, or at least not yet. Instead, they save.
Those who do invest tend to look for purpose and sustainability.
While millennials are definitely more conservative than their parents when it comes to investing, they are a lot less risk-averse when it comes to launching their own business.
It wont be easy to convince this tech-savvy generation of the added value of investing their money in something different than a savings account or their own entrepreneurial venture. One thing seems certain, this will be an interesting challenge for the 2018 investment industry.