16 April 2021

How to engage a younger investor

In this article, we look at the key reasons why young people are investing more than ever, and how asset managers can engage with younger investors and guide them to invest in a sensible way.

In January, the finance industry was shocked by the impact one Reddit forum could have on Wall Street. Working in unison, a number of the five million forum users were able to move the price of GameStop, a failing American games store, up by over 1,000 per cent, rivalling record numbers on Wall Street. This landmark moment showed the capability of young people to influence the market and their desire to bring about change which, in their eyes, involved ‘bringing down Wall Street’.

It is reported that millennials are to benefit from $30 trillion intergenerational transfer of wealth – a vast sum of money, much of which could be invested – making millennials a key market for fund managers to be working with. Young people, the first generation of digital natives, represent 50% of the world’s population. Unless young investors are guided correctly, they risk losing sums of money they can ill-afford to. In fact, recent figures from the Financial Times highlighted that half of US retail investors were new to the markets last year, and these are mostly young people (under 34) who are more likely to borrow to fund their bets and to use social media to find trading ideas.

There are five key reasons as to why young people are investing more than ever. Firstly, the width of data and information about financial products has never been greater. This allows young people greater insight into their trading decisions. Secondly, the ability to make investments anytime and anywhere, via apps, has brought the stock market to their fingertips. While social media is a learning tool that many older investors can look upon with envy, younger people tend to find ways to access information faster, providing them with an advantage over less savvy traders.

Beyond accessibility, however, the environment and social movements are crucial parts of young people’s lives, beyond just investments. Young people are keen to show support for brands and movements that resonate with them on environmental and social levels. This support is likely to be shown when it comes to investments, too. A 2017 YouGov Survey showed that millennials are twice as likely to invest in companies targeting ESG goals compared to the generation before them.

Young people are driving for a cleaner, greener, and environmentally friendly future. Social movements, such as the more recent ‘Black Lives Matter’ and ’Me Too’ movements have, almost always, been driven by younger people. Both examples show that young people are well versed in what’s going on worldwide and are keen to stand up and be counted – an indication that younger people will also prioritise sustainable and ethical brands when investing.

Finally, the emergence of ‘side hustles’ has shown how many young people are dissatisfied with how much they earn. They want more money and know that trading is an achievable way to attain this.

A question many will ask is where and how young people have learned to invest – especially as investing isn’t taught in schools. However, the savvy nature of social media-literate people opens them up to a wider world of advice. They know where to find advice on apps such as Instagram, YouTube and TikTok. According to a survey by ‘Find Out Now’, 50% of new trading accounts in the past 12 months were opened by people who were more likely to take advice from social media than established investors.

Furthermore, apps such as Trading212 and Robinhood – despite recent controversy – are popular amongst younger investors. They provide insights into the market, allow users to practice without real money and have a strong social media presence. This allows younger people to learn which stocks perform well, how the market is impacted by events and how risk averse they should be.

In most cases, young people are not going to want to read books about investing. Therefore, the challenge is how to educate people who aren’t listening to asset managers and are instead learning from influencers. While some of the advice on social media can be useful, asset managers must ensure that their expert advice is the first that novice investors see, placing further responsibility on the shoulders of those best qualified to reach out and help young people.

The most important way to do this is to reach them in the places they frequent most, social media, and meet them at their level. There are infinite examples of brands and organisations who have used social media as a tool to reach their – often younger – audiences in the social apps they are most likely to spend their time on. Apps, social media, and websites with information on how to invest successfully are more likely to be well received by aspiring investors. If young people are going to reputable sources to receive such information, rather than via unqualified advisors, they will reap the rewards and see large profits.

Beyond this, however, asset managers can attract younger investors by providing a personal story highlighting their expertise. If young people can see the tangible benefits of investing, it is more likely to give them an understanding of how they should approach investment. Furthermore, it will help place their trust in asset managers for advice – rather than YouTube influencers.

An effective way to match the YouTube and Instagram influencers is to provide visuals. Apps such as Trading212 and Hargreaves Lansdown have made their way onto TikTok via advertisement, capturing the attention of potential young investors. To match this, asset managers must not only ensure they are reaching young people in their social apps, but also providing the right visuals to entice them. They must see why they should trust an asset manager over a trading app or their favourite influencer – not just hear why.

This new wave of younger investors is a trend we must encourage and allow to flourish – continually engaging them and guiding them to invest in a sensible way, but also using their modern solutions expertise to learn from them too.

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