Born between 1997 and 2012, Generation Z (Gen Z) is the first generation not to know life without the internet. These digital natives grew up with technology at their fingertips and witnessed the birth of transformative gadgets like smartphones, e-readers and Bluetooth.
Gen Z has also weathered economic crises, including the Great Recession of 2007-09 and the recent Covid-19-induced recession. In a March 2020 Pew Research Center survey, nearly half of young adults (then ages 18 to 29, encompassing the oldest Gen Zers and youngest millennials) reported job losses or pay cuts due to the pandemic, the highest share among all age groups.
Today, Gen Z is poised to disrupt the financial landscape with their unconventional investment decisions. Over the next two decades, as the Silent Generation and Baby Boomers transfer wealth and assets to younger generations, a fundamental transformation is expected.
“It’s a seismic change. We’re witnessing the historic convergence of two powerful forces: growing private capital and social and environmental consciousness,” said Ben Whattam, co-founder of Modern Affluence Exchange. “There is a huge dichotomy at play: 71% of the world lives in a country where inequality is growing, while record numbers of next-gen family members recognise they have a responsibility to counter inequality with impact investing or fighting climate change.”
Knight Frank’s Wealth Report 2024 states that the difference in outlook between younger and older generations will result in a substantial reappraisal of marketing strategies for anyone wanting to sell products or services to this newly wealthy group.
Gen Z is making a difference because they know how to make waves in all different kinds of industries. They are not just surpassing the impact of millennials but also outranking them in size. According to a report by Morgan Stanley, “Gen Z will overtake Gen Y as the country’s largest cohort by 2034, ultimately peaking at 78 million.”
Gen Z’s impact transcends size; they’re also the most tech-savvy generation ever. Their fluency in technology, honed from growing up with the internet, gives them a distinct advantage.
As older generations retire in large numbers, Gen Z will soon make up a far more significant cut of the “potential customer demographic” pie for financial providers, so ignoring them would be a significant mistake.
Whattam suggests that the next generation, wielding considerable investment power, will likely direct significant capital toward causes beyond mere economic growth. Different values and perspectives will guide their consumer spending.
“Take the fact that 66% of millennials focus on investing with purpose, compared with 49% for Gen X,” he stated. “Climate change is the number one concern for Gen Z and whether they’re rich or just affluent, they see it as their generational responsibility to fix what has been broken by their elders.”
“This issue is fundamentally changing consumer behaviours, particularly for those with wealth,” he added.
Diverse approaches to wealth
The shift in capital has resulted in a diverse approach to wealth, with women representing a growing share of global Ultra High Net Worth Individuals (UHNWIs). According to recent survey findings from Altrata, women make up around 11% of global UHNWIs. While still a small share, this represents rapid growth from just 8% less than a decade ago. “Given the attitudes of female Gen Z-ers we note below, this looks likely to remain the direction of travel,” the report noted. Not only that, Gen Z is also most confident in its ability to create wealth. Knight Frank’s Attitudes Survey reveals that 71% of UHNWIs globally anticipate growth in their wealth this year.
For HNWIs, the survey reveals a more conservative figure of 65%. A pattern emerges when data is analysed by age: younger affluent groups are more confident about the economic outlook than older groups. Only 52% of HNWI boomers anticipate growing their wealth in the next 12 months, compared to 75% of Gen Z-ers, with 43% expecting “significant growth”. Male HNWIs express greater confidence than women. This is particularly pronounced among male millennials, with 75% expecting their wealth to grow, compared with 64% of women. However, these expectations are entirely reversed for Gen Z, with a remarkable 81% of women in this group expecting growth. Half expect “significant growth”.
Climate change tops the investment agenda
Climate change is pivotal for the younger generation, influencing their investment decisions and consumer behaviours. The report identifies climate change as an area that shows clear generational differences in priorities and that environmental concerns will influence investment decisions. Looking at the top-line question on carbon emissions from the Attitudes Survey, millennials appear to have raised the bar when it comes to cutting consumption–80% of male and 79% of female respondents say they are trying to shrink their carbon footprints. Male boomers take a different view, with just 59% trying to reduce their impact, well below their female peers (67%). Recent work undertaken by The Future Laboratory confirms a shift in attitudes around wealth, with younger groups looking at the opportunity it provides to act as a force for change.
“The growth seen in sustainability and impact investing areas hasn’t been driven solely by younger investors – but there is growing awareness that investment portfolios can actually have a positive impact on people and the planet and many younger clients want us to help them achieve this,” said Mike Pickett, Director of Cazenove Capital
Social media plays a pivotal role
Social media and emerging technologies are essential tools for reaching and engaging with Gen Z. Financial advisors must stay abreast of emerging trends, leveraging analytics and reporting to cater to this tech-savvy generation. Social media and emerging technology will be an unmissable way to reach and cater to Gen Z.
According to Lexis Nexis, the newest generation in the workforce will keep their financial advisors on their toes by double- and triple-checking opportunities on parts of the Internet that are generally not used to find investment advice.
Retaining the right research tools is crucial for keeping up with younger generations. Advisors can use analytics and reporting to stay ahead of emerging trends like sustainable investment opportunities and online banking apps that are gaining popularity.
As the “Great Retirement” unfolds, Gen Z and millennial workers will reshape the market with their interest in alternative investments like cryptocurrencies. The financial industry must adapt to this evolving landscape.
