In 2022, geopolitical shifts have changed amidst growing conflicts in addition to the aftermath of the pandemic which has changed people’s lives permanently in terms of how they think about work, investments & wealth in general. These changes have had major economical impacts as behavior changes ensued in investment & financial sectors.
This resulted in slowing economical growth. This has led to a paradigm shift in the approach towards investment.
Tradesocio, one of the most prominent figures in FinTech, has been monitoring the trends of the investment market, paying special attention to young investors, also known as millennial investors.
Statistics indicate that 80% of millennial heirs seek new advisors after inheriting their wealth. They are also more likely to lean towards Robo-Advisors, which are artificial intelligence driven advisory programs. The remaining 20% are those who take after those of which they inherited and are unlikely to break the practices of the previous generation.
For this 80% group, receiving personalized advice and seamless experiences across digital channels are non-negotiable. They also prefer to transact remotely. This has led many leaders in the FinTech industry to utilize a client-first approach with puts an enormous emphasis on user experience and user friendly feature sets.
It has been observed that millennials are putting their money towards investments that have another component: making a positive social impact. This practice is called sustainable investing, and it considers criteria around environmental, social, and corporate governance for investments in addition to the aspect of financial returns.
Millennials have been putting their money towards companies and funds that are helping to do things like alleviate poverty, protect the environment, or further human rights around the world. They want to generate ROI in both financial and social spheres.
According to a 2020 Global Sustainable Investment Alliance report, the average percentage of AUM devoted to ESG investments globally reached 13.2% while 89 percent of investors consider ESG issues in some form as part of their investment approach, according to a 2022 study by asset management firm Capital Group.
There does remain one big question that millennials and wealth managers are focused on: do sustainable investments provide similar financial returns to regular investments?
Millennials are willing to take a risk– in fact, Morgan Stanley found that 59% of millennials believe that there is a trade-off between social impact and financial returns.
Environmental, social and governance (ESG) investing, is the term coined for these investment choices, Today, up to 64% of High Net-Worth investors (HNT) ask for an ESG score before investing in a fund.
In fact, ESG investment, as a portfolio, is easier to pitch than any other sector. With $30 trillion wealth transfer coming to millennials over the coming decades, this preference of using investments as a vehicle for creating positive social change is more than just a trend.
Sustainability is a far greater consideration for millennial investors today than ever before. The heightened awareness around ethical and environmental issues is driving wealth management clientele to demand ESG expertise from their investment advisors.
The future looks bright with millennials thriving & this statement does not only mean financially, the future of the world as a whole looks bright with new thinking that is not only wealth centered.