Millennials are markedly different in their approach to investing than Baby boomers (Generation X), for one, they grew up and lived their most impressionable years during the great depression and saw the brunt of the housing crisis at its peak. They have also lived through the dot-com bubble and many see the markets as rigged in favour of the big guns.
This created an inherent fear of the stock market in the entire generation. So much so, that they are wary of the traders or investment bankers and see them largely as snake oil salesmen. However, on the flip side, this skepticism and pessimism about the market make them cautious investors. Most millennials are very wary of where they invest their money, hence, they tend to do a lot more research, online and vet any opportunity thoroughly before investing.
The Millennial mindset: Investing with a heart
This tendency of millennials to do their own research about companies also means that they actively seek out companies that reflect their core values. Whether it is being environmentally conscious or ethically sourced, the investor of today cares about putting their money where their heart is. Cutting corners or unethical labour practices can be a death knell in today’s stock market as Millennials care deeply, more than any previous generation, about sustainability and a company’s moral compass. The massive success of Nike’s Colin Kaepernick campaign is evidence of this investing mindset. Although controversial, the campaign that stood in support of the #BlackLivesMatter campaign led to a surge in online sales by almost 31%, mostly driven by Millennials. This despite the backlash by the ‘baby boomer’ generation and by president Trump himself.
Tools for the Millennial investor: Simplified investing with complete transparency
This approach of being ‘invested’ in ‘investing’ means that Millennials are looking for more DIY platforms to investing and more transparency at every stage of the process. They prefer to do their own research and are often on the lookout for tech that makes their lives easier. New age investing platforms are doing just that, providing investors with the tech they need to get started while keeping it simple and user-friendly. Similar to any other choice that they make, millennials care about customer convenience. Similar to an Uber, Venmo, Tinder or any other service that they use, Millennials love services that enable them at the click of a button. Investment platforms are adapting to this by focusing on user experience and convenience for the investor. They are focusing on building solutions also help automate the tedious research that goes into investing and helping create savvy Millennial investors. The investment platforms that will come out on top are those that successfully use tech to simplify the steep learning curve that comes with investing.
Every penny counts: Advanced analytics and tracking for the inquisitive investor
Another defining characteristic of the generation is that they are often burdened with student debt, as well as lower incomes, uncertain futures, and less job security than the baby boomers. In such a scenario, they care more about where every penny is being spent and are less likely to ‘trust’ their Wealth advisors. Wealth management firms have to adapt to this trend by justifying every investing decision or recommendation with hard data and analytics. Platforms like WealthFy that allow for detailed reporting, analytics, portfolio attribution and monitoring will help new investors feel at ease. AI enabled Robo advisory is another major driving force in helping temper ‘gut based’ investing, helping assuage concerns for Millennials who often have a diminished risk appetite.
The Wealth management firm that serves their users with a dedicated and high-quality app along with exceptional customer service is likely to have the edge in landing a Millennial client. Failure to adapt to the shifting paradigms will eventually lead to many of the laggard firms being phased out to be replaced by ‘tech enabled’ firms or by DIY investing platforms.