Hitchhiker’s Guide to the #GenerationY Investor

Jared Lesar, Candidate Attorneys at Bowmans

John Loubser, Candidate Attorney at Bowmans

Hashtags, apps and status updates – welcome to the world of Generation Y. Masters of everything hip and high-tech, Generation Y-ers, commonly understood to consist of those born between 1980 and 2000, are, according to an article in Time Magazine, sometimes labelled as lazy, entitled, selfish, shallow and fame-obsessed. Ask any Generation Y-er about these stereotypes though and the likely response, distributed across a multiplicity of social media, would be something like, ‘nobody understands us’ - and they would probably be right.

What about the typical Generation Y-er’s attitude towards money and investing? For financial advisers, taking the time to learn what influences a Generation Y-er’s financial decision-making and understanding, and how to engage with them is key to tapping into this strategic market segment. It is therefore crucial to understand what characterises Generation Y, and more importantly, how to appeal to the next generation of investors.

Who are they?

While grouping individuals born across two decades and in extremely varied socio-economic circumstances is problematic, certain economic and political issues unify Generation Y. They will have grown up during the rise of the internet, increased consciousness of climate change, geo-political instability following global events like 9/11, and many Generation Y-ers will have left school to face the continuing effects of the 2008 recession on the job market. Further still, South African Generation Y-ers must confront the lingering socio-economic effects of apartheid.

Unsurprisingly, these factors affect the financial decision-making of Generation Y-ers. A study found that as a result of experiencing the financial crisis early in their careers, they are highly conservative regarding risk compared to other generations. Moreover, having witnessed the impact of the 2008 recession on their parents’ long-term investments, as well as the culture of instant gratification that characterises the Digital Age, Generation Y-ers are typically sceptical of long-term investing as a means of achieving financial success. They are also more likely to delay important life milestones like starting a family and purchasing a home compared to their parents.

The study notes that the advent of the internet has also affected how Generation Y-ers make financial decisions, though not in the ways you might think. Although they have digital access to more information than ever before, they tend to look to their spouse, friends and parents for key financial advice more than any other generation and will then make decisions based on input from multiple sources.

A new generation of advisers

Generation Y-ers are more comfortable than other generations with mobile technology and transacting online and financial advisers will need to engage with younger investors on their terms. According to an article on Thinkadvisor.com, more than half of Generation Y-ers would prefer a ‘hands-off’ or low-touch engagement with advisers, and email and phone calls together are the preferred methods of communication for millennial investors.

In the near future, online automated investment advisor platforms, or ‘robo-advisors’, designed to generate customised investment plans based on parameters provided by investors, will likely become increasingly popular among younger investors, who typically look for a low-cost, real-time and transparent service.

Lasting relationships

However, while inventive technological solutions catered to young investors’ needs can give financial advisers the competitive edge, Generation Y investors, like their elder counterparts, still seek a personal experience and service.

Financial advisers should be mindful that, perhaps more so than any other generation, Generation Y-ers yearn to be treated as individuals, each having their own unique inspirations and aspirations. Take the time to validate your assumptions about Generation Y investors and engage with them continuously about their ever-changing financial needs. Connect with them instead of simply selling a product.

Doing so will allow you to establish valuable long-term relationships with young investors, and crucially, might just help you avoid being among those who simply ‘don’t understand us’.