Going the distance: Attracting the elusive millennial investor – Part 1
By: Nick Curwen
As any sports enthusiast knows, the best teams are the ones that properly execute the basics. Asset management is a performance game and any firm that fails to generate sustainable, consistent returns faces intense pressure from its clients. However, improvements need to go beyond performance, particularly given the rapid evolution happening in today’s asset management and investor world.
A long-term vision is integral to any asset manager’s success, and today, this means managers must understand the millennial market.
Millennial investors are currently starting families and acquiring mortgages, so they have very little disposable capital. However, this generation is about to receive one of the biggest transfers of wealth ever recorded in history, with some estimating the baby boomers will bequeath up to $30 trillion to their children.1
By 2020, millennials will become the largest demographic in America, with one in three adults in the U.S. falling into this category.2 Accenture estimates millennials in Asia will have $6 trillion in disposable income by 2020, more than any previous generation. In addition, calculations estimate that 60% of the world’s millennials will live in Asia by 2020.3
There is consensus among asset managers that millennials do not possess an extensive knowledge or understanding of finance. Managers must find a way to change this or they will never be awarded mandates from this demographic.
In addition, a Schroders study of 20,000 investors found that millennials possess the most inflated return expectations among age groups: 10.2% per year versus the global average of 9.1%.4 This reflects a degree of naivety around young peoples’ conceptualization of finance. It proves that the asset management community must do more to educate younger people about investments and how capital markets work at a high level.
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To learn how your transparency and environmental, social, and governance (ESG) policies attract millennial investors, read “The elusive millennial investor – Part 2”.