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Millennials set to change the investment landscape

Millennials set to change the investment landscape

Millennials are likely to change mainstream investing to focus more on social, political and environmental responsibility, according to new research.

Millennials - typically known as people born between 1980 and 2000 - are becoming increasingly savvy about how and in what they would like to invest, while also becoming the largest demographic at 29% of the population.

By 2030 it's expected Millennials will represent the largest source of income and consumer spending, earning two out of every three dollars in Australia.

Not only will they become the biggest earning group, Millennials are also set to inherit significant wealth, further increasing their importance to the investment industry.

A report from Deloitte - Millennials and wealth management – found that this age group prefers self-directed investments through state-of-the-art technological platforms that allow them to access investments quickly and easily throughout the investment cycle.

Online broker CommSec adds that Australian Millennials now account for 25% of exchange traded funds (ETF) trades.

CommSec reports that 50% of all its new customers are under 35, with Millennial customers up by 51% in the past five years and representing 28% of all active members.

How do Millennials invest?

Deloitte's report also found that 87% of Millennials believe that business success should be measured by more than just financial performance.

Environmental, social and governance (ESG) are three central factors used to measure the sustainability and ethical impact of an investment in a company or business.

This has become a big driver in how Millennials invest with a doubling in funds invested in 'core responsible investment' strategies from 2013 to 2015 to $51.5bn and reaching 3.8% of total assets.

More impact to come

The trend is likely to accelerate further as Millennials make up a larger proportion of the market.

Many feel how they invest is a way to express their values, which could see financial investments to become more aligned with social, political and environmental factors.

According to a survey from U.S. Trust, 93% of Millennial investors considered a company's impact in these areas to be important when making an investment decision.

What this tells us is that Millennials are ahead of the curve when it comes to thinking about the impact and implications of responsible investment strategies.

Further, they are more likely to favour responsible investment strategies and are also 1.5 times more likely to believe that investing responsibly does not negatively impact performance.

All this means the financial services industry will need to continue to adapt as responsible investing becomes increasingly mainstream and less of a "niche" or "nice-to-have" addition to traditional shares offerings, and other asset classes including property, fixed income and cash.

The infomation from the report issued by Colonial First State Asset Management (Australia) Limited AFSL 289017 ABN 89 114 194311 is directed at persons of a professional, sophisticated or wholesale nature and not the retail market. This document has been prepared for general information purposes only and is intended to provide a summary of the subject matter covered. It does not purport to be comprehensive or to give advice. This is not an offer document, and does not constitute an offer, invitation, investment recommendation or inducement to distribute or purchase securities, shares, units or other interests or to enter into an investment agreement. As the advice on this page has been prepared without considering your objectives, financial situation or needs, you should, before acting on the advice, consider its appropriateness to your circumstances. This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Colonial First State Global Asset Management (CFSGAM) is the consolidated asset management division of the Commonwealth Bank of Australia ABN 48 123 123 124. CFSGAM includes a number of entities in different jurisdictions, operating in Australia as CFSGAM and as First State Investments (FSI) elsewhere. Commonwealth Bank of Australia (the “Bank”) and its subsidiaries are not responsible for any statement or information contained in this document. Neither the Bank nor any of its subsidiaries guarantee the performance of the fund or security or the repayment of capital. Investments in the fund or security are not deposits or other liabilities of the Bank or its subsidiaries, and the fund or security is subject to investment risk, including loss of income and capital invested. Any securities or prices used in the examples given, including but not limited to Exchange Traded Funds, are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. Reference to the names of any company is merely to explain the investment strategy and should not be construed as investment advice or a recommendation to invest in any of those companies. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia.