Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 225

Will millennials change the investment landscape?

Millennials recently became the largest demographic cohort, and now 29% of the Australian population was born between 1980 and 2000. By 2030, they will represent the largest source of income and consumer spending, earning two out of every three dollars in Australia. While much has been written about how the shift in spending patterns will change the retail landscape (online over brick and mortar and experiences over materialism) relatively little research has focused on the changes to investing and asset management. Over the next two decades millennials will not only become the largest earners but are also set to inherit significant wealth, further increasing their importance to the investment industry.

Tech savvy and socially responsible

Much of the focus on the investments of millennials has to date revolved around the growth of passive/ETF investing (according to Commsec, millennials now account for 25% of ETF trades) and the use of ‘robo-advice’. Both have largely been driven by lower minimum investments and perceived low fees, making them attractive entry level propositions. While these trends are likely to continue, millennial investors are also likely to move into more traditional investment products as they build wealth over their lifetimes. Indeed, we are already beginning to see this, with Commsec finding that 50% of all new customers are under 35 years of age while millennial customers have increased by 51% over the last five years and now represent 28% of all active members.

With 87% of millennials believing that business success should be measured by more than just financial performance, one of the largest changes is likely to be the continued growth in responsible, sustainable or ‘impact’ investing. Growth in these strategies is accelerating in Australia, with rise in funds invested in ‘core responsible investments’ from $11.9 billion in 2006 to $64.9 billion in 2016 and reaching 4.5% of total assets, as shown below. Market share remained under 2% for the majority of the last decade, but have surged in the last few years.

Core responsible investment strategies as a percentage of assets under management

Source: RIAA, Responsible Investment Benchmark Report 2017 Australia.

With 85% of millennials interested in or currently using social impact investments, this trend is likely to accelerate further as they make up a larger proportion of the market. Additionally, 85% of millennials now consider investment decisions as a way to express their values. Financial investments will become more aligned with social, political and environmental factors.

At CFSGAM, we recently conducted a survey of our own staff (30% of whom are millennials) on the extent of their individual beliefs on responsible investment. The survey found that:

  • 80% of staff believe considering ESG issues leads to more complete analyses and better-informed investment decisions.
  • 85% supported the view that asset owners should, as part of their duties, consider both the direct and indirect ESG impacts of their investments.
  • 75% believed that the risks and opportunities associated with ESG factors are not being captured in market values.

This tells us that millennials are ahead of the curve when thinking about the impact and implications of responsible investment strategies. Further, they are more likely to favour responsible investment strategies and are also more likely to believe that investing responsibly does not negatively impact performance. Indeed, there is strong evidence that utilising ESG factors improves performance, with a recent BofAML Report finding that they could have helped investors avoid 90% of bankruptcies.

The funds management industry will need to adapt and responsible investing will become increasingly mainstream and less of a niche or nice to have addition to traditional offerings.

 

Harry Moore is Head of Business Development for Australia and New Zealand at Colonial First State Global Asset Management, a sponsor of Cuffelinks.

 

5 Comments
Chris
November 02, 2017

And as a side note to the financial planning industry, the time to get involved and interested in millennial clients (and anyone else who isn’t a boomer like themselves, by the way) is BEFORE they grow their wealth, not when you think they might just suddenly inherit a whole lot (which is not a given and probably the exception, rather than the rule).

Most planners I’ve talked to look down their nose and over their bifocals at my modest, sub-million net worth and think it’s not worth bothering about.

Otherwise, you just come across as a gold digger, who suddenly becomes interested in marrying an old (wo)man with a dodgy ticker who has just won the lottery. It’s pretty obvious.

Gen Y
November 04, 2017

Oh Chris, I'm sure they're interested. They'll surely sell you some life insurance...

Rick
November 06, 2017

Wow, "bifocals", seriously? You've just painted the picture of a Bank Manager circa 1972, pretty outdated, cynical stuff. I don't know who you've been talking to, but the advisers I know are all energetic, progressive, and forward looking - they're very happy working with less established clients. In fact, helping younger clients move decisively towards achieving their goals is the part of my job I actually enjoy the most. And btw if an adviser charges a flat, dollar based fee, how much accumulated wealth a client has is irrelevant from an adviser remuneration perspective.

Gen Y: Life insurance and estate planning is a serious part of the wealth building/wealth protection equation, and for an adviser to not discuss it with a client would be negligent in the extreme. Let's not have a shot about 'selling' life insurance?

Chris
November 02, 2017

“set to inherit significant wealth, further increasing their importance to the investment industry.”

Really ? Sorry, but as a Gen-X (born late-70s), I don’t expect or demand that my parents (one of them already being in a nursing home) will have anything to leave me (as one of four kids), in that the only thing they own are some cash, premium bonds and the house (which is nothing special).

They will likely need that money to look after themselves and any aged care requirements.

If they do leave me any money, it’s a good surprise, but I’d go and pay my mortgage off, then put my daughter through school / university, and if there was anything left after that (unlikely), then look at investing it.

Frank
November 02, 2017

Why are people born in 1980 called ‘millennials’?

 

Leave a Comment:

RELATED ARTICLES

Four reasons ESG investing continues to grow

Looking deeper than the home page of roboadvice

Sustainable, responsible or ethical – what’s the difference?

banner

Most viewed in recent weeks

Australian stocks will crush housing over the next decade, one year on

Last year, I wrote an article suggesting returns from ASX stocks would trample those from housing over the next decade. One year later, this is an update on how that forecast is going and what's changed since.

What to expect from the Australian property market in 2025

The housing market was subdued in 2024, and pessimism abounds as we start the new year. 2025 is likely to be a tale of two halves, with interest rate cuts fuelling a resurgence in buyer demand in the second half of the year.

Howard Marks warns of market froth

The renowned investor has penned his first investor letter for 2025 and it’s a ripper. He runs through what bubbles are, which ones he’s experienced, and whether today’s markets qualify as the third major bubble of this century.

The perfect portfolio for the next decade

This examines the performance of key asset classes and sub-sectors in 2024 and over longer timeframes, and the lessons that can be drawn for constructing an investment portfolio for the next decade.

9 lessons from 2024

Key lessons include expensive stocks can always get more expensive, Bitcoin is our tulip mania, follow the smart money, the young are coming with pitchforks on housing, and the importance of staying invested.

The 20 most popular articles of 2024

Check out the most-read Firstlinks articles from 2024. From '16 ASX stocks to buy and hold forever', to 'The best strategy to build income for life', and 'Where baby boomer wealth will end up', there's something for all.

Latest Updates

Investment strategies

The perfect portfolio for the next decade

This examines the performance of key asset classes and sub-sectors in 2024 and over longer timeframes, and the lessons that can be drawn for constructing an investment portfolio for the next decade.

Shares

The case for and against US stock market exceptionalism

The outlook for equities in 2025 has been dominated by one question: will the US market's supremacy continue? Whichever side of the debate you sit on, you should challenge yourself by considering the alternative.

Taxation

Negative gearing: is it a tax concession?

Negative gearing allows investors to deduct rental property expenses, including interest, from taxable income, but its tax concession status is debatable. The real issue lies in the favorable tax treatment of capital gains. 

Investing

How can you not be bullish the US?

Trump's election has turbocharged US equities, but can that outperformance continue? Expensive valuations, rising bond yields, and a potential narrowing of EPS growth versus the rest of the world, are risks.

Planning

Navigating broken relationships and untangling assets

Untangling assets after a broken relationship can be daunting. But approaching the situation fully informed, in good health and with open communication can make the process more manageable and less costly.

Beware the bond vigilantes in Australia

Unlike their peers in the US and UK, policy makers in Australia haven't faced a bond market rebellion in recent times. This could change if current levels of issuance at the state and territory level continue.

Retirement

What you need to know about retirement village contracts

Retirement village contracts often require significant upfront payments, with residents losing control over their money. While they may offer a '100% share in capital gain', it's important to look at the numbers before committing.

Sponsors

Alliances

© 2025 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. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. 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.