Despite the recent hype which points to the growing focus towards ESG and ethical investing, Calastone’s study – which surveyed more than 3,000 people aged 23-35 across the UK, France, Germany, US, Hong Kong and Australia – shows long-term returns on capital, low fees and transparency as the most important criteria for millennials when it comes to making investments – essentially, younger generations, like their older counterparts, favour the basic pre-requisites of investing before considering ethics.
Long term returns and fees came out on top, with 53% of millennials rating them as their key consideration when choosing investment funds. Second was transparency of the firm’s investment strategy, which ranked at 50%. Less than one third, a mere 32%, of millennials felt it was important to consider ethical issues or factor in good causes or products when choosing an investment fund. This is contrary to current sentiment which suggests ESG is front of mind for younger investors.
Respondents were asked to rank from not at all important to very important. The percentages represent the totals who selected ‘very important’.
Calastone’s survey – which asked respondents about their attitudes towards personal saving, investment management and financial services more broadly – showed that, whilst millennials are tech savvy, there remains strong demand for people to communicate with experts in person as they invest. When managing investments, 42% of all millennials chose speaking directly with people as their preferred method.
Conversely, whilst millennials’ approaches to managing their investments are more traditional than previously thought, when it comes to selecting a financial services provider in the first instance, they do still consider online access to be the most important element.
Millennials are also willing to trust big tech companies with their investments. Calastone’s study shows that 50% of all millennials would purchase investment products through a technology company (such as Google, Apple and Microsoft). Technology brands have built such a level of trust they could pose a threat to the asset management industry, who must consider how they can remain competitive.
Several figures in media and industry suggest traditional fund distribution models are dated and don’t meet the requirements of the modern, digital-savvy investor, where technology can fulfil these needs better – some of these results are a clear testament to that. Supporting this further, 31% of respondents who already hold investments stated they would trust a computer algorithm to invest on their behalf.
The study also highlighted a key educational gap amongst young people. 47% of millennials, on average, reference a limited understanding of investing or investments. This could be hampering their ability to invest their savings.
However, appetite to invest is high, with the majority of respondents indicating they would invest some of their assets going forwards. 84% of those millennials with investment experience agreed they would be willing to invest more of their cash in the future, whilst 68% of those without any investments stated they would like to invest.
The results of the study present a clear disparity amongst the newest generation of investors. There is a willingness and appetite to invest their capital, though insufficient understanding of, and access to, investment services could be inhibiting the ability of young investors to do so.
As the study data validates, business and industry need to be conscious of these issues and adapt to the needs of the newest investors, for greater simplicity, transparency and cost-efficiency. The results shown prompts the question, how well does the industry operate to service these specific needs of the investors?
Technology could form a large part of addressing these demands from millennials in helping to shape a more sustainable investment management environment, better suited to their future.
To access Calastone’s full survey, you can follow the link at https://www2.calastone.com/millennialsresearch