Data proves generation gap in investment trend

We have been hearing about politicians and analysts expressing opinions about how the new generation is viewing investing and saving. They are coming under greater scrutiny for their non-conventional spending habits, attitudes towards money and investment choices.

In continuation of the research upon these aspects, continuing the third of the series on this topic.

The younger generation i.e. Millennials are relatively more likely to spend money to make a good impression with 15 per cent of them are agreeing to do so while the number falls to 3 per cent among the Boomer generation.

A survey conducted by Ameritrade in 2016 puts that about a quarter of the Millennial respondents want to enjoy life now and spending money helps them do that but only 15 per cent of the Baby Boomers feel the same.

Surprisingly, 17 per cent of the Millennials felt that they should spend more/save less while young and catch up with saving later in life but only 5 per cent Boomers opined same. Would that be what we call the generation gap, more data supports so.

The spending habits also have diverse behavioural attitudes with Millennials spending on unnecessary clothes by about 69 per cent of the respondents identifying while that reduces to 45 per cent among the Boomers.

According to Charles Schwab survey conducted in 2019, the other stark difference is the way the Millennials spend on taxis and Ubers at 53 per cent while that of the Gen X and Boomers are at 29 per cent and 15 per cent respectively.

The generational response to "I would rather have more time than more money" has varied greatly with money becoming relatively more important in older age.

China, however, stands out as a country that strongly favouring time over money regardless of age. 49 per cent of the Chinese respondents between the ages of 50 and 59 chose to have more time over money while for the same age group US and UK stand at mid 20's while that of Germany and Japan stand at lower teens.

And Chinese across the age groups have consistently scored higher than the averages among these countries on this parameter, the Japanese have shown an even balance across all generations maintaining a range of 6 per cent to 12 per cent among ages of 60+ and late teens respectively.

Also, an interesting saving habit that's defining or rather differentiating among the generations. About 44 per cent of the Millennials would opt for preparing meals at home more regularly to save money while that becomes 60 per cent of the Gen X and increases to 65 per cent for Baby Boomer generation.

20 per cent of the Millennials are open to take public transportation or pooling car or bike while that goes down to 11 per cent and 8 per cent with Gen X and Boomers respectively.

Also, the younger generation are not really keen to improve at-home efficiencies like (low-flow showerheads, energy-efficient bulbs, etc.) to save more money.

While only 17 per cent of the Millennials are willing to opt this route, 27 per cent and 36 per cent are the respective figures for Gen X and Boomers to opt these methods.

Checking at the trends of investment and their preferences, ESG i.e. Environment, Social and Governance as criteria are now a component of investment strategies for four fifth of global institutional investors.

According to a study conducted by Global Sustainable Investment Alliance in 2018, Europe is the only region that has seen a reduction in ESG's share of total assets over recent years, while Canada, Australia and New Zealand have deployed more capital to sustainable investing during the same period.

Though the value of assets is still smaller, the targeted investments aimed at solving social or environmental problems has now grown at 79 per cent between two years of 2016 and 2018.

In contrast, the sustainability-themed investing has ballooned by 269 per centduring the same period to investments such as clean energy, green tech or sustainable agriculture.

69 per cent jump was witnessed in this period for the inclusion by investment managers of ESG factors into financial analysis. The single biggest barrier for greater adoption of ESG across investment portfolios is the inconsistent quality of data across asset classes.

According to BNP Paribas 2019 survey, 32 per cent of polled global asset managers and owners felt this to be the largest hurdle while same percentage of respondents felt that the costs required to invest in smart/emerging technologies as another equally bigger hurdle.

The same survey also enumerated that 52 per cent of the respondents felt that improved long-term returns as the greatest motivating factor for integrating ESG into investment portfolios.

While 47 per cent of them felt that it would impact the brand image and reputation, over 37 per cent opined that this portfolio decreased investment risk.

33 per centof the respondents realized that it's the requirement of external stakeholder demands and about 32 per cent thought could attract new talent.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at knk@wealocity.com)