Young investors are moving away from mainstream investment paths as they no longer trust traditional financial structures, said panellists at this year’s Association of the Luxembourg Fund Industry (ALFI) Global Distribution Conference.
The comments were made at a panel entitled “Millennials and Gen Z investment preferences: does it include investment funds?”, where three young market participants were quizzed on the investment preferences of millennials and Gen Z.
Facing constant crises throughout their lives, and with more to come, the ‘digitally-native’ generation has more access to markets through online routes, the modernisation of the industry, and new directives and regulations, said Julie Leclercq, Masters student in European banking and finance law at the University of Luxembourg. However, alongside this, they have considerably less income than previous generations, moderator Olivia Moessner, partner at Elvinger Hoss Prussen, stated.
Despite this, there is an interest in investment. Anna Letta, sustainability operations officer at Luxembourg Finance Labelling Agency, cited the low interest rates of savings accounts as a contributing factor to this, while the democratisation of private assets was seen as a contributing factor, according to Filip Persson, corporate administrator at Triton Partners.
The widespread availability of financial advice was mentioned by all three panellists, however the basis by which young people are making their investment decisions was criticised. Letta brought up the concept of financial influencers, or ‘finfluencers’, who offer unvalidated advice through social media platforms such as Instagram and TikTok. With many young people beginning their investment journeys with little to no financial education, this leads to dangerous investments and a higher chance of losses, Letta said.
Persson addressed the gamification of investing that has come as a result of mobile investment apps. Offering zero brokerage fees and a game-like user interface, investment apps can make the process seem far simpler and less risky than it is, he said.
Letta was keen to address the ESG concerns of millennials and Gen Z, stating that it is a “number one priority” among the age groups, and that they are willing to forgo return for positive ESG impact. Letta went on to say that current regulation still needs more clarity, and that the definitions of sustainability and sustainable investment can be confusing.
Leclercq agreed that ESG was an important issue, and argued that regulations should go further and need to be reviewed and harmonised across Europe. However, Persson stated that few young people construct their portfolios with ESG in mind.
The panellists ended the discussion by concluding that financial education is vital to ensure that young people understand the markets they are investing in and how the process works. Leclercq stressed the need for this to begin in schools, rather than through social media channels and unregulated advisors.
