What’s the word on the street with millennial investors?

The millennial investor is different. They connect differently; they buy differently. They are inspired and motivated by different things.

Marketers suggest they place far higher importance on happiness and passion than their parents do. While referred to as the selfie generation, they are far more interested in community and diversity than their predecessors. And globally, business is still learning how to interact with them.

The more things change

Yet sadly, some things remain the same; most notably, millennials seem to be repeating the mistakes of their parents. For a nation labelled by the World Bank as the biggest borrowers in the world, millennials are not reversing the statistic that 86% of South Africans are borrowing money.

In fact, millennials are cementing this pattern of behaviour both locally and abroad.

The make up

Firstly, despite their open attitudes towards politics (50%* consider themselves politically unaffiliated) and religion (29%* are religiously unaffiliated), millennials are extremely financially conservative, preferring to be savers rather than investors.

The World Bank report states that this attitude to money has been shaped by their access to lightning-fast technology innovation, and the dramatic economic and market volatility that changed their lives. This includes constrained job prospects and earning abilities, as well as disruption to their parents’ real estate values, investment portfolios and retirement savings.

How to encourage change

So, for the generation with easy access to information, yet a deep distrust of the markets, how do we change their attitudes towards investing?

It is important to understand that most South African millennials start their economically active lives under the burden of student debt due to the rampant rising costs of tertiary education and their parent's inability to help fund it.

Additionally, theirs is a culture of consumerism. Many choose to buy material things such as cars as status symbols rather than for functional purposes, often spending more than is rationally sound, which serves to increase their debt burden, leaving less expendable income available at the start of each month to contribute to long-term investments and retirement.

And, millennials prefer putting whatever they save into cash reserves, a trend highlighted by a 2014 UBS report on the NextGen Investor.

The Bankrate Money Pulse survey reports that just 26% of people under 30 are investing in stocks. This leaves millennials in an extremely compromised position because they aren't saving enough, and what they do save isn't yielding the returns required to build meaningful wealth for their retirement.

What do we know?

There are an abundance of tools and the easy ability to invest. There is an unprecedented access to information. While it has never been easier to invest, few millennials seem to be taking advantage of this opportunity.

While millennials do more research than any generation before them, they have extremely low purchase rates when it comes to investment products. Millennials, together with their risk aversion and lack of trust, suffer from analysis paralysis.

In terms of addressing these issues, financial institutions need to find ways to cut through the clutter and provide simple, easy-to-access investment options.

For the same reason, it also pays to enlist the services of a qualified financial professional. For a group that states that only 19% of others can be trusted, this presents business’ largest problem (the 10% is according to Pew Research Center). Transparency, simplicity, and integrity are the only means to overcome this distrust.

For starters, in the age of social media, millennials tend to value the collective wisdom of their peer networks more than that of individual advisers. However, this need not be a barrier to access prudent financial advice from a broker or planner. The engagement model has simply changed, and the industry needs to find ways to change with it. In doing so, we can create an environment where potential investors are encouraged and are able to speak to someone who can help them make financially astute decisions.