Funds: How those born after 1980 want to invest was a big topic during this week’s Alfi Spring Conference.
Photo: LaLa La Photo
Tech savvy, hungry for experiences rather than amassing possessions, but strapped for cash: this is a standard view of the millennial generation. So how to get them saving, let alone investing?
Those who have reached adulthood this millennium have witnessed the dotcom boom and crash, the 2007/8 banking crisis, and the surreality of quantitative easing. Their parents expected to buy their homes, but this generation can only afford to rent. Thus, we are told, millennials focus on having life experiences rather than accumulating possessions. Cheap communication technology and cheap transportation has made them connected global citizens.
If true, how can the financial industry induce young adults to save, let alone invest for the long term? This topic inspired the discussion “The Millennials - New generation, new investor attitudes, new tools” at the Association of the Luxembourg Fund Industry Spring Conference on 8 March.
Millennials love their mobile phones and tablets, so an IT-based tools would seem to be an obvious way in. Providing “information” doesn’t seem to work, however. “There is an increasing amount of information available, but there is too much and this complexity leaves us with the same knowledge gap as before the internet,” said Julian Presber of the University of Luxembourg.
Ask a robot?
Robots might be the answer. So-called “robo advisors” are becoming increasingly popular with investors unwilling to pay for personal financial advice. Plug your age, income, risk appetite and investment goals into a website, and an algorithm will point you towards a suite of products that might suit you. Online tools could also introduce smaller savers to diversified funds investing in “alternatives” like real estate, private equity and hedge funds.
If this sounds too impersonal, how about “social investing networking”? For example, eToro.com is an American online community in which individuals and groups of ‘friends’ build portfolios online, with their details and performance of visible to all. You could browse this site for information, or you could copy the investments of others, trusting in the “wisdom of the crowd”.
“I have a young colleague who is supremely intelligent, and knows the financial sector, but he uses Nutmeg”, a UK-based robo-advisor site, said Martyn Cuff of the insurance firm Allianz. If someone like this is unsure of their investment options, what hope for everyone else?
We all need help
And in this way, are millennials much different from Generation X and baby boomers? Less than 10% of Europeans own shares directly or through funds, showing widespread ignorance of how we should build broad-based investment portfolios. And don’t we all love our mobiles?
A conference delegate asked for a show of hands from the audience about who this year had sent a handwritten letter or made a money transfer using a cheque or virement. Hardly anyone had, demonstrating that everyone is a potential user of smart, easy-to-use, IT-driven investment tools.