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rethink everything

Disruptive. Socially responsible storytellers. The millennial mindset and wealth.

RE-Wave3_AuthorsWeb-Gacon.png   By Bertrand Gacon, Head of Impact Investing, Lombard Odier Investment Managers


In terms of capital, millennials are coming of age, and with them comes different attitudes, philosophies and priorities. How can the investment universe adapt to their needs, and what kind of opportunities will millennials themselves offer?

With the financially-burdened millennial being a ubiquitous stereotype, it would be easy to neglect millennial wealth management priorities in favour of more traditional investment strategies. And yet, millennials, who by 2025 will account for nearly three quarters of all income1, represent a growing portion of the wealth market. And of course, given enough time, wealthy individuals born after 1980 will comprise 100% of that market.
 

The gender split of wealthy individuals is also shifting. Women now control 30% of investible assets, with their wealth expected to grow from $13 trillion to $18 trillion by 20212.


And it would seem that this shift is, at least in part, generational—30% of wealthy millennial women earn more than their husbands, compared with 11% of wealthy Gen-X women and 15% of wealthy female Boomers3.

With the proportion of wealth controlled by this generation increasing by the day, it’s inevitable that the world of investments will need to adapt to meet the needs of millennials. To understand what this might look like, we first need to explore how millennials, generally speaking, think.


Millennial minds

Materialism is on the decline, and collecting experiences is on the rise. In a survey of millennials, 66% said they’d find a live experience more fulfilling than buying a physical object for the same price4. The rise of social media likely has something to do with this—you can’t furnish your feed with material goods, but you can turn it into a veritable museum of stories5.

Corporate citizenship is also a major focus for millennials. In its Global Sustainability Report, Nielson found that 73% of millennials are willing to spend more on products from sustainable brands, and 81% look for public declarations of corporate citizenship from their favourite companies6. Meanwhile, Cone found that 81% of millennials were more likely to buy from brands that supported solutions to specific social issues, while 84% considered brands’ involvement in social causes when thinking about how to buy and shop7. This represents a shift in this group’s mentality. Accumulation comes with two prices—the financial cost, and the cost to society. From a consumerism point of view, both elements go hand-in-hand.

The growing wealth of women is also likely to be a big driver in the increasing focus on citizenship. On average, women are substantially more likely than men to give to charity, and they score more strongly than men for altruistic values and behaviours8.
 

Taken together, these two concerns—a focus on citizenship, and a desire for validation through storytelling—suggest that wealth management strategies with a focus on responsible capital will appeal to millennials, especially if they’re actively involved in shaping their portfolios.


In short, responsible investing offers millennials the chance to grow their wealth in the meaningful way that’s mitigated by reputational risk. This typifies the generation.


Conscious disruptors

The second thing to consider is the mindset of wealthy millennials specifically. Whether or not they’re self-made, nearly all wealthy millennials are actively working9. They’re also far more entrepreneurial than the previous generation, with millennial entrepreneurs having started twice as many businesses as baby boomers10.

The flexibility afforded by physical infrastructure no longer being a startup prerequisite, coupled with the Gen-Y penchant for progressivism, means that millennial businesses are often highly disruptive. Throw in the characteristic focus on corporate citizenship, and it’s easy to see how young entrepreneurs have a tendency to create highly compelling responsible opportunities.

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For instance, take Michael Preysman, who at age 25 founded San Francisco-based fashion brand Everlane. At first blush, Everlane doesn’t seem to be pushing any envelopes—their apparel, while clean and sharp, shows no sign of the hottest trends or even any visible branding. But look a little closer, and it becomes clear that this is in fact one aspect to its being a socially responsible disruptor. In bucking the trend of chasing trends and eschewing the notion of vogue-driven wardrobe updates, Preysman built a business that instead focuses on creating timeless designs made from high quality materials, encouraging their customers to wear their clothes for longer and, ultimately, to buy less. The other facet of its responsible disruptiveness is what Everlane calls “Radical Transparency”. Unlike most fashion retailers, Everlane’s ethos is to go to great lengths to be open about where their products come from. Every product page details the materials from which it’s made, and links to in-depth information about the factory in which it was manufactured. Most unusually, there’s even a breakdown of exactly what it cost Everlane to produce that product, including materials, hardware, labour, duties and transport. In short, Everlane has become a clear choice for the sustainability-conscious consumer, and sets a standard for other fashion brands to follow.


Individual impact

Perhaps the most exciting thing about millennial entrepreneurs is that they’re only just getting started. Even the oldest millennials have around three working decades ahead of them. And with their typically disruptive, socially responsible mindset, any one of them could be the next Elon Musk.

This past November, Glowfly revealed their list of Europe’s Top 50 millennial entrepreneurs at the European Parliament. A glance down this list reveals a wealth of potential.
 

Number one on the list is Javier Rodriguez, co-founder of BIOO, a startup looking to tap into the power of photosynthesis to turn forests into clean energy stations.


Elsewhere on the list is Jordina Arcal’s company HealthApp, which creates software to help patients suffering from long-term and chronic illnesses communicate with their therapists; and Peter Ferenczy, co-founder of EVA, a voice-controlled AI assistant for people with visual impairments.

To invest in startups like this is not just to invest in a business; it also means supporting some of our most visionary millennial CEOs. The chance to watch them go on to change the world is surely the very definition of responsible capital.


The new face of wealth

Given the psychology of soon-to-be wealthy or affluent millennials, it’s clear that the demand for responsible investing is just getting started. Indeed, current numbers bear that out. In a survey of millennial high net worth clients, 79% described themselves as Impact Investors. 72% planned to put more of their portfolio into responsible investments over the next five years. And 10% were already 90% - 100% Impact Investors11.

Excitingly, this increased demand for using capital for good will in large part be met by disruptive, socially responsible next-gen entrepreneurs. This feedback loop between growing demand for using capital for good and an increasingly impactful base of coming-of-age rethinkers, could be the trend that defines the changing face of wealth for decades to come.

Accenture
2 CityWire
3 CNN
4 Eventbrite 
5 Forbes 
6 Forbes 
7 Mish Talk 
8 Psychology Today 
9 The Fiscal Times
10 Fortune 
11 Toniic 

Important information

This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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