Generation Z: a new investment target
A group called the “Internet Generation”, doesn't remember a world without an iPhone or social connectivity.
Members of Gen Z, people born from 1997 to 2010, are a generation barely out of their teens, so their investment patterns are not entirely understood. They seek the truth, value individual expression and avoid labels. Members of Gen Z are more inclusive than any previous generation and they are on track to be the best-educated generation so far.
The fact that they will make up more than one-third of the global workforce by 2030 has meant that the financial industry should reconsider its approach and mindset to adapt to the needs of a new generation.
So what are the factors that cause Zoomers to be a disruption for wealth management industry?
Social and Environmental Responsibility
Zoomers would not be happy investing just for the sake of earning more money; most of them want to invest in a way that reflects their personal values. Around 87% of Zoomers will consider a firm’s ESG track record, not just its latest “green” marketing, as they feel the consequences of climate change more than older generations.
Gen Z is focused on the impact of their investing: they tend to have a greater focus on social responsibility and sustainable investing, perhaps even more so than millennials. They want financial gains to be balanced and have a positive global impact.
Advisors will need to adapt to a generation that is more pressured financially than others, but still wants to leave its mark on the world. Generation Z is more keen on saving, values financial knowledge. Furthermore, the generation is far more entrepreneurial then any preceding generations.
Its members are more money-conscious than any other generation. They prioritise financial security and retirement planning, putting money away for retirement sooner than Millennials, Gen X and Boomers. Up to 10% of Gen Z are already saving, or planning to save for their retirement .
Let the numbers speak for themselves: 35 percent of Gen Zers say they plan to start saving for retirement in their 20s — versus 12 percent of Millennials. And only a quarter of Gen Zers surveyed expect to receive retirement money from the government, versus a third of Millennials.
Today’s teenagers prioritise tomorrow’s financials over their immediate desires — which is an important attitude for any investor looking to grow their portfolio.
On the other hand, they are tempted by hype and social media to invest in ultra-high-risk instruments.
Integration of Technologies
Gen Z is generally far more knowledgeable than older generations were at the same age. Improvements in formal education as well as the availability of vast amounts of information online have seen to this. At the same time there is an urgent need to filter it and develop critical thinking.
From smartphones and tablets to Instagram and Facebook, Gen Z is the generation that grew up with modern technologies. For personal finance and investing, young investors are turning to digital and mobile-first solutions. Popular trends include robo-advisors, budgeting apps, cryptocurrencies, and cashless transactions.
Gen Zs will certainly be willing to engage with professionals offering personalised financial advice, meeting their wealth manager and having access to them when needed, but they are totally comfortable with, and prefer, digital communication solutions. Although, they may not feel well-served only by algorithms — at least not yet.
For digital natives, personal data privacy is the key, so advisors must ensure this is a part of their message when using technology. Labeled as the “True Gen”, Gen Z has earned a reputation for searching for truth and asking institutions in power to be accountable for their actions and transparent about their policies.
It is clear that Gen Z is changing the future, named the powerful economic generation. If financial advisors strive to engage Gen Z in their portfolio, they need to rethink approaches and make it simple, fully transparent and digital. Moreover, the service providers need to integrate honest and clear communication and cater to social and environmental needs, making investing more personalised and accessible to investors with all levels of experience. Meanwhile the focus shift that wealth managers will experience in the nearest decade also brings equally attractive opportunities for business growth, so it’s important to stay open and to embrace the challenge.