Young millennials and Gen Zers are entering an era in which they are embracing their financial futures head on, taking more control of their investments. Unlike past generations, these new entrants to the investment scene have greater access to the financial markets and resources around investment decision-making.
Beyond that, they are both purpose-driven and digital natives, making their approach to investing far different than many veteran investors. These considerations combine to create great opportunities for the next generation to truly embrace owning their financial futures – though not without risks.
Data underscores these differences for Gen Z and Millennial investors vs. prior generations. Our recent Trust Study underscored many of the aspects and attitudes of young investors, particularly their desire to have a social impact with their investments, beyond earning returns.
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Further, a survey conducted by Deloitte found that 68 percent of Gen Zers and 72 percent of Millennials in India realize the increasing importance of acting on climate change. With ESG-related conversations gradually becoming more defined in India, it stands as a focal point for younger investors. Millennials and Gen-Zers are recognized as likely targets for ESG investing because they are concerned about the need for a green future, equitable rights, and resource value.
Balancing the desire to marry their personal goals with their financial goals, Gen Z also faces unique challenges — whether it be more financial independence, a waning promise of income security upon retirement, or mounting climate issues that are more pressing than ever before.
For those of us in the investment industry, there’s a huge benefit to understanding these pressures and meeting investors where they are. When I think about the ways we can elevate their desires and benefit the world as a whole, I feel a true sense of excitement.
Young investors, especially those in their 20s, can easily access and leverage new tools and applications to gain a better understanding of their investments. Today, savings and investing apps are fundamentally changing how Gen Zers and Millennials run their financial lives. While sometimes assailed for the “gamification” of investing, these tools, when used properly, bring a host of advantages.
Before jumping into these platforms, it’s important to perform thorough research to ensure that the platform is secure and meets their needs – each is unique, serves a defined purpose, and can benefit different levels of investment expertise.
Luckily, we know that this younger generation is trusting of the investment industry. And despite their tendency to seek advice on the internet, they do value the advice of professionals steeped in expertise. In partnership, we can plan for the long-term, keeping the new-age technology top of mind. A knowledgeable, educated, and ethical financial advisor can be a distinct advantage in providing advice on how to reach one’s life goals.
It remains important that young investors take the time to find the right financial adviser. I especially recommend working with an adviser who understands personal investment philosophies, which is a critical step to a thriving long-term partnership.
India represents a unique market, taking into account the striking optimism that Indian Gen Zers possess regarding the economic and socio-political situation, which also reflects in their rising trust in the investment process. Investors in India actually have one of the highest levels of trust when compared to their peers around the world, according to our research. This particular high level of trust is encouraging for the continued success of the financial markets in India.
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I strongly suggest that young investors articulate their key beliefs, values, and life goals to their trusted financial advisors. By defining their priorities, they can implement them strategically as part of a long-term investment strategy. Research and knowledge of financial opportunities can help to build an investment mix that is correlated to their own value system and, in turn, ensure those values are reflected in our financial system, both globally and within India.
ESG-related concepts for investment products can be challenging to understand, especially for a young investor. I urge young investors to do their research and have a thorough understanding of ESG-oriented assets. Consulting with their advisor about the definitions of ESG-related investment products and their real-world impact will be extremely valuable as well. We know that not all products are created equal, and the issue of greenwashing remains throughout the industry; it’s important that young investors don’t fall into that trap.
Investing can be exciting and equally challenging. While the markets are constantly evolving, I believe that approaching investing with a sense of optimism and opportunity is imperative. From investors like me who have made this our life’s work, I can assure you it’s well worth it.
By Margaret Franklin, CFA (President and CEO, CFA Institute)
(Disclaimer: Views expressed above are personal and do not reflect the official position or policy of Financial Express Online)