Carmel Fisher: Generation has a mind of its own

Millennials are more conservative and socially conscious than previously believed. Photo / Mark Mitchell

Younger group’s suspicion of financial assets could have lasting results

There was a moment this week, at question time following a presentation to a group of university students, when I felt a strong sense of deja vu.

Over the years I have often been asked about the likely impact of baby boomers on financial and property markets. You know the story - all these boomers are going to retire at the same time and want to sell their houses, buy smaller ones and invest the proceeds in assets that will give them a retirement income.

Given that they have traditionally been keen sharemarket investors, it was imagined that boomers would sell en masse, pushing shares down, and driving pockets of the property market up, while leaving a swathe of large, unwanted family homes.

I never really bought into this line of thinking since I am not a fan of sweeping generalisations; there is no evidence of any particular cohort acting in unison based on their age or other demographic factors. There has certainly not been any evidence of markets being moved by a swarm of investors acting together. Well, except when investors get spooked and/or greedy - but that's a different topic.

What made this week's Q&A session different was a younger person (under 25) asking about the baby boomer generation, as if his parents' or grandparents' actions were somehow going to affect him. While it was probably reflective of his passionate interest in all things investment, it did get me thinking about the generational differences in attitudes and the impact of date of birth on likely outcomes that investors might experience.

There is a significant generational shift going on and, unlike the boomers' expected behaviour, it looks likely to have lasting implications.

First, we should define the generations. Baby boomers are typically those born between 1946 and 1964. Generation X are currently aged 37 to 50. The millennials, who seem to be the generation whose attitudes have the most profound implications, are aged 20-36, born between 1979 and 1995.

The millennials have now entered the workforce, and while they were previously thought of as a broke, spendthrift and narcissistic generation, it seems they have been underestimated.

They have now been shown to be socially conscious, conservative and responsible in their thinking.

Millennials now outnumber baby boomers in the US and are often their children. They witnessed how their parents fared through the global financial crisis; they are determined to avoid having their property values decline, investment portfolios dwindle and retirement savings wiped out. A recent UBS study showed millennials believe working hard and living frugally will be a more successful strategy than long-term investing. They are the least trusting of any generation and have a focus on surviving rather than thriving.

A survey by MFS Investment Management suggested that nearly half of millennials "never feel comfortable investing in the sharemarket". It also showed that millennials keep more of their assets in cash and, despite their youth, have a short time horizon of less than five years for their investments.

If investors were concerned 10 or 20 years ago about baby boomers selling their shares and financial assets to fund their retirement, they should be more concerned about millennials not wanting to go near financial assets in the first place.

Millennials also care about where they put their money and want to align with brands and companies whose values align with their own. A majority have reported buying a product or service with social benefits; 84 per cent of millennials surveyed said they considered a company's involvement in social causes before deciding whether to support it or not.

Knowing now how millennials think, I find my student's question even more endearing. As if his parents' investment intentions are going to change anything!

• This column is presented in association with Fisher Funds.