With their habit of viewing life through a smartphone, millennials have already disrupted industries like retail, the media and transportation. Now they’re driving shifts in investment markets with a wave of new technologies and products that cater to their demands.
According to the ASX Investor Study 2017, 39% of millennials (25-34 yo) invest outside of their superannuation. Research suggests that this same demographic is disillusioned about purchasing property, so it seems natural for equities to be their go-to for wealth creation.
This next generation of investors wants sophisticated platforms that are powerful and convenient — and make the world a better place.
This new generation of investors have an endless supply of company research at their fingertips, a plethora of education online giving tips on where to put their savings and plenty of successful investors keen to tell them the ins and outs of investing.
The question is – where does the millennial investor actually want to put their money?
Where are millennials putting their money?
Many millennials do not believe they will be able to achieve the same spending milestones as their parents like buying a house or retiring, until much later in life than their parents. For this generation, buying a house, the biggest asset that many of their parents would have ever owned, is not an investment at all. Investing in the stock market might be their best option.
With the rise of fintech disruption, investing has become simple, with apps and online accessibility making it easy (and affordable) for young people to get their start in the investment space. Millennials currently make up over 30% of active CommSec accounts.
The question is – what companies attract these young investors. Research suggests that they tend to be quite picky when investing, because they really want to be in control of where their money is going, and that millennials portfolios tend to focus on companies they know and use.
And of course – they are looking to invest in value.
The New Value Investing
According to Deloitte’s 2017 Survey of Millennials, 43% of millennials feel personally concerned about hunger, healthcare and income inequality, and 31% of millennials are most concerned about the environment.
They feel really accountable for “big issues” that are impacting the world, but they feel a great deal less influential in creating change.
As you can see, protecting the environment and social equality are high on the list of values for millennials. And it seems the definition of investing in “value” has changed. As strange as this might seem to a sophisticated investor, or to a retiree funding their superannuation, creating wealth isn’t the sole aim of investing in the stock market for the next generation of investors.
The aim of building wealth for the future is coupled with a desire to have an impact and have a positive influence on the environment and social change. Investing in companies that share these values is a no brainer – and if millennial have anything to say about it that is where they will find true value.
The issue is that although 74% of millennials believe that businesses have the potential to solve these challenges, only 59% actually think that those businesses are actively trying to create change.
How Is Social Impact Shaping Businesses?
With the knowledge that millennials are looking to invest in the stock market, but are overwhelmingly looking to invest in solving the “big issues”, it makes sense they we are seeing a plethora of socially responsible investing opportunities.
Companies are taking an active role in becoming more ESG friendly, and taking on feedback from their customers to up their social consciousness. Ethical Fashion and Beauty has seen a surge of buyers moving away from ‘fast fashion’, opting for companies they are sustainable and cruelty free.
The idea of consumers understanding supply chains and identifying exactly where their purchases were coming from is reasonably new to these ‘fast businesses’, looking to churn our sales and engagement quickly with as little interaction as possible.
It has become apparent that this trend isn’t just for the socially conscious, but is quickly becoming a necessity for businesses trying to get a look in from millennial consumers. In 2015, Neilson’s Global Responsibility & Sustainability Report found that 73% of millennial are willing to spend more on a product if it comes from a sustainable brand.
The same goes for investing – finding value in companies that go above and beyond in environmental, social and governance responsibilities is quickly becoming the way forward. Not only will their own revenues see the impact of a generation of consumers specifically searching for positive impact, but those looking to become shareholders are holding companies accountable to responsible investing.
It has moved beyond being green, and being charitable, but businesses who focus on sustainability are playing the long-game, which is great news for a market looking for long-term value. And it seems to only be increasing as the next generation of investors invest in the future. As millennials begin to engage with wealth and asset managers, they will continue to disrupt the industry due to their sizeable population, inheritable wealth and preference for digital channels of communication. With this in mind Glennon Capital is launching the GC ESG Future Leaders Fund, a fund being driven, in part, by millennials who prefer to invest in alignment with personal values.
Given the imminent intergenerational wealth transfer, we see an opportunity ahead to redefine the standard for investment options.
We believe wealth and asset managers must adopt values-based investment options to serve a new era of investors. At Glennon Capital our investment team can provide portfolio management that will meet the new needs of the millennial investor.