The Millennial generation often makes headlines for their spending habits, difficult marketability and the so-called “killing” of various industries; however, the generation isn’t just ending old-school trends, they’re also transforming the future of various industries we already know. One sector of the economy quickly coming to that realization is the financial services industry. With a new set of priorities significantly different from their parents, Millennials are shifting the future of retail investing. Between their focus on social impact and responsibility to a preference for easy, on-the-go accessibility, the way we invest is changing with the times.
Investors typically consider straightforward factors when investing: a certain amount of risk tolerance, the time horizon and the performance of those investments. However, those factors aren’t the only ones recent college graduates are interested in nowadays.
According to research from the Spectrem Group, over half of Millennial investors — 52 percent — said that they saw “social responsibility of their investment as an important selection criteria.” That’s compared to less than 30 percent of WW2-era investors and 42 percent of Gen X investors. Millennials are factoring in the social and environmental impacts of their investments, not just the rate of return, with social responsibility taking the highest priority.
These sentiments aren’t just feel-good either. Additional surveyors found that a staggering 47 percent of Millennial investors felt so strongly about impact investing that they would actually “move their brokerage account to gain broader access to socially responsible investments.” Now, that influence in the investing industry is permeating through the rest of the financial world with the rise of new banks like Aspiration and Amalgamated Bank that boast “values-based banking.”
In-App and Simple
Other major factors for Millennial investors is the simplicity, ease of use and online accessibility from financial institutions, regardless of size. Robinhood has already made waves in the fintech space as one of the most popular apps for getting Millennials interested in investing, now more are on the rise.
Other fintech companies are servicing this shifting approach to finances as Millennials visit physical branches as seldom as they can. One survey found that as much as 88 percent of Millennials would prefer to never visit a physical bank branch if they don’t have to. Instead, young investors are looking for online access.
Looking at examples of how investors reviewed platforms like WealthSimple, it’s clear that the highlights tend to be focused on how easy it is to use the platform and that users can access it either via the app or website. But Wealthsimple isn’t alone in this market, similar apps have found success as well like Stash and Acorns that help Millennials with micro-investing and putting things on autopilot for users.
A key feature that attracts so many young investors is how these accessible platforms lower the barrier to entry for investing. When given the choice between taking time during a lunch break to visit a physical bank branch and/or speaking with a financial advisor or simply setting up an investment account on the couch watching Netflix, it’s clear which option Millennials are opting for. That’s good news for the financial services industry too, as Millennials are reportedly more optimistic about their financial future when compared to the population as a whole. For those companies in the fintech space who are able to adapt and shift their focus to accommodate the needs of the latest generation of investors, there’s a lot of money to be made.
While it’s unlikely that we’ll ever see the complete erasure of physical bank branches and investing services, it is clear that a shift is happening. Millennial investors and their consumer habits are tailoring the financial services industry to become simpler, more accessible, and more convenient. Challenger banks are getting more commonplace as the once unheard of concept is expanding rapidly. Between online and app-focused banking solutions like Chime, Ally Bank, and Revolut (and likely countless more on the way), even traditional gatekeepers in the banking world are being forced to respond. For the consumer, expect lower fees, many mobile apps, and a lot of online access — not a bad deal.