Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 336

Millennials struggle to invest, but property top priority

As fund managers globally scramble to diversify and future-proof their client base, more attention is now being paid to the financial needs of millennials, a demographic born between 1981 and 1996, which investment firms have struggled to appeal to.

However, a recent Calastone study of 3,000 people aged between 22 and 34 across the UK, France, Germany, US, Hong Kong and Australia sheds light on some of the lifestyle habits, ambitions and general trends among millennials in what could help fund managers better target younger investors in the Australian market.

Property priority top, ability to invest bottom

Investing does not elicit much interest from millennials globally, and young people in Australia do not buck this trend. The study found that while millennials in Australia may not be assiduously saving on a monthly basis, 71% do have some sort of saving, ranking the country higher than every market bar Hong Kong. Respondents in Australia said their primary motivation for saving was to fund their first property, a higher proportion in Australia than any other country in the study.

Blue bar is ranked 1st choice, other number is ranked in top 5 choices.

However, as shown below, a disproportionate number of Australians (84%) said their main reason for not saving was because they were unable to afford to, well above the global average of 68%. Calastone also found most Australians (71%) felt they were unlikely to receive a high-value inheritance in the next 20 years, although this is aligned with the global average. 

Millennials and money management

Although the majority of millennials globally keep their money in a savings or current bank account, there are some regional divergences in terms of how young people invest. The study found 10% of Australians invest in funds – putting it ahead of the UK and France, but a long way behind the US and Hong Kong. Most Australians said they were investing to achieve long-term capital accumulation and returns, something which is presently unavailable from many savings accounts due to the low interest rates.

Looking ahead, Australia could be quite attractive for fund managers with 76% of all millennial respondents in the local market saying they planned to invest in the future, well exceeding that of France (54%), Germany (56%) and the UK (64%), but falling short of Hong Kong (81%) and the US (77%). However, if the funds industry is to attract these assets from millennial investors in the Australian market, it needs to better understand how this generation currently purchases its goods and services.

Attracting millennials into investment funds

Technology is clearly important to millennials, with local respondents confirming they organise their personal lives online and use apps wherever possible.

According to the study, 57% of Australians will buy services and products either online or via a mobile app, putting the country on a parity with the global average. Australian millennials appear to be more technically astute when it comes to banking with 64% saying that having online access to their account information was critical, compared to the global average of 56%. Furthermore, 52% confirmed they wanted access to their bank account information through an app, which was far higher than anywhere else, particularly in Germany where only 27% said the same.

A large proportion of Australian millennials (59%) – along with those in the US (also 59%) – told Calastone’s survey they would willingly purchase investment products from technology companies such as Google or Apple in contrast to investors in Europe and Hong Kong who appear to be more sceptical about the idea. Among those Australians who already invest, 73% said they would buy an investment product through a technology company, well above the global average of 63%. Furthermore, 48% of Australians said they would trust a computer algorithm to invest their money, which is broadly in line with other countries.

Australia's millennials have a strong savings culture, and while Australian respondents have yet to fully embrace investment products, many young people are keen to invest in the future. However, embracing digitalisation will be crucial for asset managers if they are to win mandates in the tech-savvy local market. A failure to digitalise could impede asset managers’ efforts to raise funds from millennials.

 

Ross Fox is Managing Director and Head of Australia and New Zealand at Calastone.

 

5 Comments
Peter
January 06, 2020

I think most millennials see fund managers are superfluous and would rather just invest in a diversified low fee index tracker which is proven to outperform investment funds in the long run. Unfortunately there’s not much you can do to appeal when you’re seen as a middleman that ought to be cut out to maximise returns

Jeremy
December 12, 2019

Aussie fixation with property continues for another generation. Is it our culture or tax system, because European countries are not like this.

Gen Y'er
December 12, 2019

A bit of both, but I think it starts with how us Gen Y'ers (I refuse to use the cringey term 'Millenial') were raised.

We're the children of the Boomers, and the Boomers, like a lot of people, love a good asset bubble. It's an easy 'get rich quick' scheme which requires little work or effort to benefit from. Stocks used to be all the rage through the '80s until the early 2000s when stupid Boomers over-leveraged and got burnt for a second time in the tech wreck; the first being in 1987. They then started to fear the sharemarket and see it is dangerous, and never went back to 'investing' in it at the same levels they used to. Then they turned to property as it was an investment class outside the sharemarket and they saw it as a 'safe' investment. Constant buying, coupled with the original 'Australian dream' of home ownership, greed, stupidity, increasing immigration, falling interest rates and so on caused another bubble. This property bubble, however, is constantly inflating which pushes house prices higher, which creates a 'you can't lose' attitude, which causes more buying and selling and a feedback loop is created.

Now, all the while since 1987 the Boomers have been having children. Their children (like myself) are then taught the distorted teachings of the Boomers; the sharemarket is evil and bad, and property is the only good investment. They started to (and still do) trot out the same inane and idiotic dribble; "Property always goes up," "you can't go wrong with property," "don't invest in shares because you'll lose all your money." etc. This creates a new generation worshipping The Cult of Property, which fosters tunnel-vision towards only one class of investing at the detriment of all others, and the buying and selling of this one asset class causes prices to continually rise, which strengthens the belief in The Cult.

SMSF Trustee
December 12, 2019

European countries face a situation in which most land is owned by 'old money', made from feudal and other systems that didn't allow the home ownership aspiration that a young country (at least in Western terms) has been able to support.

So I guess it's cultural, at the core of what Australia offered to get people to come here (once the penal colony days ended, at least). The fact that it's been possible for everyone to aspire to own their own 'quarter acre block' has in turn resulted in a poor landlord-renter relationship structure so that most people would prefer not to rent.

I hope this never changes. I don't want most land to be in the hands of only those who own it because their family owned it 200 years ago!

Chris
December 12, 2019

It's easy for the finance industry to engage. Shift your focus from the boomers to Gen-X and start from there. The time to build wealth and engage with these people is when they are young, not when they are older and "might" have been able to do so. There is also no guarantee (especially for me, who has two parents in 24hr care and the family home just got sold to pay their medical bills) that we will inherit the boomer's money. In fact, some of us - like myself - don't and never did expect it.

Unfortunately, it's hard to find a financial planner, even as a Gen-X because most that I've seen ARE boomers and hence, more interested in servicing and relating to their own demographic. You can't have it both ways.

As an example, the amount of questions in the financial media (esp. in the AFR Q+A section on the weekend in Smart Money) are all about SMSFs, retirees, "what pension I can get because I earn X and my wife earns Y but we have A, B and C in shares, property and super" etc. Yawn, not relevant to me as a Gen-X.

Most also look like the cookie cutter corporate - white, male, grey suit. That's not necessarily something that younger demographics (born into the internet age of no ties and polo shirts) or even female investors relate to.

So for now, I think I'll keep on keeping on with my DIY approach (which has done quite well, thank you) and maybe when I get closer to retirement, I'll ask a financial planner then, who would be Gen-X.

 

Leave a Comment:

     

RELATED ARTICLES

It’s as much Smashing Pumpkins as smashed avocado

banner

Most viewed in recent weeks

400th Edition Special: 45 of the best investment ideas

Over eight years since February 2013, Firstlinks has become a leading financial newsletter, publishing thousands of articles from hundreds of writers. To mark this milestone, 45 experts have joined the celebration for our 400th edition bringing their best investing ideas for the next few years.

Four bubbly market pockets show heightened risk for investors

At the top of every market, there are signs that investors look back on and say the excesses were obvious. While many parts of the market are fairly valued, here are four bubbles which show irrational exuberance.

Turning point: the 2020s baby boom retirement surge

Every week, 2,500 Australians retire, or at least, reach the age of 65, and 2021-2027 will represent the peak years of the baby boom retirement surge. Longevity of life comes with dangers and opportunities.

How long will my retirement savings last?

Many self-funded retirees will outlive their savings as most men and women now aged 65 will survive at least another 20 years. Compare your spending with how much you earn to see how long your money will last.

The world in 2030: Six investing tips for the next decade

Six portfolio managers look at how life may change by the end of the decade and how shifting trends are influencing their investment decisions. It's an optimistic view of the world in 2030 as a better place.

The equity of government support for retirement income

Claims about the inequity of super tax concessions and the advantages for high income earners miss a fundamental point. It's fairer with more realistic assumptions on the value of future payments.

Latest Updates

Superannuation

In fact, most people have no super when they die

Contrary to the popular belief supported by the 'fact base' of the Retirement Income Review, four in every five Australians aged 60 and over have no super in the period up to four years before their death.

Investment strategies

The risk-return tradeoff: What’s the right asset mix for a 5% return?

Conservative investors are forced to choose between protecting capital and accepting lower income while drawing down capital to maintain living standards or taking additional risk. How can you strike a balance?

Investment strategies

Mind the bond/equity rebalancing gap

The 12 months ending 31 March 2021 saw the largest positive divergence in returns between global equities and bonds in nearly 50 years. To retain a target balance, investors need to sell equities and buy bonds.

Investment strategies

Do bonds still offer a buffer to equity volatility?

Most Australians place their superannuation into a balanced fund, making the relationship between bonds and equities a vital part of performance. Does the traditional correlation between shares and bonds still hold? 

Strategy

Five trends shaping investments in China: 2021 and beyond

Australia has its tensions with China but with a strong base and a competitive, well-educated workforce, China’s manufacturing champions will advance its technology prowess and gain global market share.

Investment strategies

The fascinating bank hybrid journey of the last year

Bank hybrids produced excellent returns in the last year and the biggest lesson from March 2020 is that many investors don’t understand the structures, and in a crisis, they panic first and think later.

Shares

Eight quick lessons on the intricacies of selling shares

When we think about investing, we think about buying. The intricacies of the selling decisions are frequently overlooked, and poor selling is correlated to a lack of conviction. Selling is as important as buying.

Sponsors

Alliances

© 2021 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.