Millennials are a bunch of irresponsible, smashed-avocado-eating, over-indulgent sluggards with no regard for their financial future.
Not according to one finance industry executive, who said the commonly peddled stereotype is a myth, and millennials in fact are – and will increasingly become – a presence in the market, with the power to reshape the investment landscape.
“Many people stereotype millennials as a spend-now-live-in-the-moment generation who aren’t interested in saving or investment, but that’s simply not true,” Ted Richards, head of sales with financial advice firm Six Park, told The New Daily.
Mr Richards, whose clients range from millennials to retirees, said millennials were simply investing differently to their parents, and that may be fuelling the misconceptions.
Like their parents, millennials are acutely aware of fees and of the need for diversification, he said. But in contrast to their parents, they are less interested in property and have a different appreciation of what might constitute a “blue-chip” stock.
“Baby boomers have always looked to property, or to blue-chip stocks … but if you look at Australian property today, it’s out of reach [for young people], many of the [traditional] blue-chip shares, like telcos or banks, are being disrupted, while cash is being eroded by inflation,” Mr Richards said.
Instead they are embracing web-based micro-saving sites and the likes of exchange-traded funds (ETFs) or listed-investment companies (LICs).
Mr Richards said there was even a strong undercurrent of the financial independence/retire early (FIRE) sentiment among millennials, “people actually doing everything they can to retire in their 30s or 40s”.
They are also a generation which has known only a working life accompanied by compulsory superannuation – something that had amplified their awareness of financial independence.
Geoff Brailey, a social researcher with McCrindle, said millennials straddle two generations – Gen Y and Gen Z – but are roughly considered to be a group born between 1980 and 2000.
Mr Brailey said there were about seven million millennials, aged 19 to 39, who would continue to make investment decisions for decades to come, compared with the dwindling cohort of about five million baby boomers.
And the average incomes of those younger generations, he said, were not far behind those of baby boomers. According to 2018 data, people aged 25 to 34 had an average household income of $120,380, while older baby boomers’ (aged 55 to 64) average income was $133,640.
The big difference though, was in their relative values.
Between 2006 and 2016, the number of under-35s renting a home went from 47 per cent to 53 per cent, showing younger people increasingly rejecting property ownership – or property ownership increasingly rejecting them, as Mr Brailey noted.
Many, therefore, have also become KIPPERS – Kids in Parents’ Pockets Eroding Retirement Savings – which often meant little or even no rent, and freed up some income – possibly to invest.
Technology and the information age had created far greater transparency, Mr Richards said, and opened up new asset classes for millennials that simply weren’t available to their parents.
He cited exchange traded funds (ETFs) as an example of an investment vehicle that had exploded in recent years, allowing investors exposure to thousands of companies across the globe.
“Technology has changed the landscape … like ETFs which allow people to get internationally diversified which just wasn’t available in the past because of tax implications or currency conversions. It was a very clunky and expensive process … but now young people can create these portfolios at a fraction of the cost that their parents might have paid.”
One good example was infrastructure. Baby boomers have not traditionally invested in infrastructure, but today there were several indexed products invested in infrastructure delivering healthy returns.
A review of returns by ratings firms Morningstar showed one, the Global Core Infrastructure ETF has returned 18.49 per cent over the past year, for example.