So much has changed in the last 10 years around how we think about money and how and where we invest it.
It’s been a decade that has shaken confidence in financial institutions, governments and even our political beliefs. And younger generations are challenging just about everything – from how we invest, to who we trust.
The world of investing is changing – from everyday things (when was the last time you stepped inside a bank?) to big-picture themes such as Bitcoin, blockchain, the Royal Commission and the ongoing ripple effect of the Global Financial Crisis.
To tie in with launch of The New Investors, here are some of the major trends that will dominate the world of investing and topics we will focus on over the coming weeks.
The future of investing is in the hands of the younger generation…
The wealthiest generation in history, the baby boomers, is aging and getting ready to hand down a record-breaking amount of assets to the next generation.
It will be the greatest intergenerational wealth transfer of all time with about $55 trillion dollars passing from baby boomers to “millennials” (people aged between 18 and 35).
Much of this will be in the form of property wealth stored up over an unprecedented Australian property boom. That leaves young people with a lot of money to play with.
And they care about where their money goes…
The new investor cares about where their money is invested and wants to put it to work for a better world.
Appetite for ethical and sustainable investments has increased dramatically as has the number of funds set up to cater to this market.
The new investor is less likely to invest in tobacco, weapons or gambling than their parents.
Instead they want to solve environmental and social issues such as education, climate change or clean energy while at the same time making a healthy financial return.
But at the same time, they want to make money fast…
While their parents were happy to set and forget watching returns on their investments appreciate over time, the new investor wants to see returns at download speed and are not wedded to one asset type for life.
This is evident in the explosive growth in cryptocurrency investment or leveraged investments such as CFDs (‘contract for differences’ where essentially, you’re betting on the rising or falling prices of currencies or stocks as opposed to owning the underlying stock).
They’ve lost trust in the financial system…
Trust in financial institutions has never been lower.
Ever since Lehman Brothers declared bankruptcy in 2008 and the onset of the GFC, a deep distrust in the big financial institutions ensued.
The injustice of watching banks get bailed out and perpetrators go unpunished while millions lost their jobs and homes left a deep-set lingering distrust among the younger generations.
And the recent Royal Banking Commission did very little to repair that – exposing deep flaws in the once trusted Australian financial system.
The horror stories that emerged such as charging dead people, flogging products to people who had no need for them, strengthened the resolve of an already distrustful generation.
And they are frustrated…
Here’s a few reasons why.
Australians are struggling with the lowest rate of wage growth in decades – meaning they haven’t got a pay rise above inflation in years.
At the same time they’ve watched CEO pay packets sky rocket to about 70 or 80 times the average worker (if we include bonuses etc). This growing inequality has led to widespread frustration.
Furthermore, “underemployment” in Australia is huge is a growing problem. Today, one in three working Australians are employed part-time whereas 25 years ago, just one in 10 were employed part-time.
At the same time, this generation who are trying to buy a property in major cities are looking at prices that rank as some of the least affordable in the world relative to income.
But they’ve embraced the gig economy…
So while they may be frustrated, they are certainly flexible. The new breed of investor doesn’t expect to only earn money from their day job.
The 30-year career job at one company and a gold-plated super is not what they aspire to. They’re adaptable and are comfortable with technology reshaping our job landscape, our investment landscape, our markets, banking and consumer choice.
We have seen disruptive technology rewrite or erase many job roles altogether. But new jobs, startups and side hustles are emerging every day – Ebay store owners and Airtaskers – new industries and investment opportunities are rising where old manufacturing jobs wane.
And do it all from their mobile…
These new custodians of the world’s global capital expect to bank on their mobile and at that, within an app.
If they want to play in the stock market there’s a micro-investing app for that, if they can’t get money from the bank there’s a peer-to-peer lending app to help, if they need financial advice they can turn to a robo-advisor, if they need money to get their business off the ground – there’s a crowdfunding app for that.
They use data to make better investment decisions…
Investors have never had so much information at their fingertips.
The new investor collates information from a wide variety of sources typically driven by social media, twitter or messaging boards. And where investors once would have made investment decisions on a hunch – now algorithms are doing the work for them.
Known as “alternative data”, teams of data hunters are searching through troves of information from every imaginable nook and cranny to find signals of sound investments.
From monitoring customer reviews to gauge company sentiment to robots monitoring CEO speeches for alarm-bells. It stands to reason that data will soon trump intuition when it comes to investment decisions – just ask Al Bentley.
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