Over the past decade, there has been a shift in the way older generations view Millennials. Initially cast as egocentric and spoiled, the matriculation of Millennials into the workforce has assuaged these initial fears. Plus, academic research shows that Millennials are not that different from their older baby boomer parents. However, there is one element that sets Millennials apart from older generations. Money. While Millennials don’t have a ton of money right now, a historical shift is about to occur. The shift will leave Millennials as the global guardians of capital. This places Millennials at the helm of controlling worldwide wealth and a new attitude about how money is managed. Here are five reasons that Millennials stand to control the future of money.
1. Millennials are about to receive a massive transfer of wealth
Millennials stand as benefactors to one of the most substantial intergenerational wealth transfers in history. According to a Boston Consulting Group analysis, in 2015 Millennials were estimated to control roughly 17 trillion dollars of wealth. This is expected to increase dramatically by 2020, as Deloitte has projected that number to rise to 24 trillion dollars. Those are massive numbers!
This transfer of capital will take place in various forms – gifts, changes in business control, inheritance, investment transfers and more. Millennials will soon be responsible for a significant piece of global wealth, and that means a change in how wealth is managed.
2. Millennials are digital natives
To start with, Millennials are technologically savvy. Dubbed digital natives by Marc Prensky, a Harvard MBA and author, Millennials, or anyone currently between the ages of 19 and 35, came of age during the technological boom of the early 2000s. And as a result, technology is second nature to them.
As a generation, over 90% of Millennials check their mobile device within 15 minutes of waking up. It is fair to say that technology is ubiquitous in their daily lives. This means that they have become accustomed to sharing personal photos and opinions on Instagram and Facebook, and they are equally comfortable linking private information, such as bank account details, to mobile apps like Venmo or Paypal.
3. Millennials are comfortable sharing data
Millennials feel safe sharing their personal data because as digital natives, Millennials are incredibly comfortable navigating complex technology and understand the value that technology can play in their daily lives. As a result, they show a higher propensity to share personal information such as age, location, income, or birthdates. The caveat to this exposure is that Millennials expect an advantage in sharing this data. Specifically, they expect fast, efficient, and reliable service and advice.
This expectation manifests itself in a survey showing that 57% of Millennials are prepared to share their detailed savings plans and targets with others because they perceive that doing so would offer a more tailored approach to reaching their financial goals. This openness affects their interaction with online businesses, and Millennials have come to expect a wider and more tailored choice of content.
4. Millennials will use Capital for more social good
With the proliferation of technology, Millennials have become more mindful of global issues such as poverty and human rights violations. This increased exposure has lead Millennials to become hyper-aware of the benefits of using capital for social good. Additionally, they expect businesses to give back to their communities and act in a socially and environmentally responsible manner. This relatively new concept means corporate behavior will have an impact on Millennial’s investment decisions. Those under 35 are twice as likely to sell an investment if they perceive a display of poor corporate behavior. And over 87% of Millennials believe that corporate success should be measured by more than just financial performance.
This means that we are entering a new era of corporate responsibility and Millennials aren’t afraid to put their money behind their beliefs, or tell their robo-advisor to do so.
5. Millennials will set a new course for money management
Robo-advising is a relatively new way wealth managers have removed the initial hurdles of investing and mastering the basics of personal finance for the Millennial generation. Business is booming for companies like Wealthfront, Betterment, and Personal Capital who have tapped into the underserved and technological savvy Millennial wealth management market by providing an investment management experience that occurs predominately online. Armed with superior technology and proprietary algorithms, these companies have digitally streamlined the investment, portfolio allocation, and wealth management process.
It comes as no surprise that robo-advisors have become the new craze in Millennial money management. Millennials have observed the costs of the old way of managing money, face-to-face meetings, and high fees, but don’t see the benefits. This has created a void, and Millennials once again looked to technology for the solution. And it delivered. With relatively low costs and leveraged technology, it looks like robo-advising is here to stay.
Millennials are in control of the future of money, whether older generations like it or not. Armed with the knowledge that a massive transfer of wealth is about to occur, Millennials need to prepare themselves for this new found responsibility by increasing their understanding of personal finance now to manage the tide to come efficiently. With education and practice, they will be able to rely on their digital savviness to master money in a fresh and exciting new way. By doing this, Millennials will control the future of money.