Drawing on research, much of which has been done in the US, Mike Delano, Asset & Wealth Management Leader at PwC Luxembourg, looks at how and why asset managers can reach Generation Z. In this analysis, he argues that not only can they not afford to ignore this young and growing market, but also that they need to craft marketing strategies on digital platforms to compete with the financial influencers who currently command Generation Z’s attention.
Over the last two years, the Securities and Exchange Commission (SEC) clamped down on celebrities who were promoting crypto-assets on social media without disclosing they were paid to do so. With the proliferation of such promotions and supposed financial experts offering advice online, one thing has become clear: social media is the new wild west of asset management. Traditional players would do well to pay attention to the space in order to enlist new clients, especially among younger generations.
‘Zoomers’ (as members of the so-called ‘Generation Z’ are known) were born between 1997 and 2012, and many of them are currently entering the labour market. Like Millennials (1981-1996), many Zoomers started their adulthood during epochal financial setbacks – the Global Financial Crisis (GFC) and the COVID-19 pandemic, respectively. As a result, young people are eager to build their own retirement plans, especially given current demographic shifts causing severe strains to public pension plans.
Despite their young age, 56% of Zoomers aged between 18 and 25 own some kind of investment, and 25% began investing before turning 18 as per a study by FINRA and the CFA Institute. In other words, Zoomers are eager to invest and asset managers should recognise this large new market base. They need to focus more on social media outreach – as most young people now seek financial advice through the internet – and consider providing products that meet prospective clients’ demands in terms of sustainability and risk composition.
To secure their future, Zoomers need to invest
Zoomers face a difficult investing landscape. Their wages are lower than preceding generations, and they generally have less disposable income that can be set aside for investing. The following graph shows how wages in the United States have mostly stagnated since the early 1970s, when the oldest Baby Boomers were 27, just like the oldest Zoomers are today.
Note: All data on wages is adjusted for inflation to 2022 dollars.
Source: PwC AWM & ESG Market Research Centre; Economic Policy Institute, Federal Reserve Bank of Minneapolis
Consumer prices have risen consistently since the 1970s, and Zoomers have considerably less purchasing power than Baby Boomers did when they were younger. In the US especially, student debt and the overall cost of education is an enormous additional burden on younger generations, as public and private university tuitions have soared.
Unsurprisingly, Zoomers are less confident that they will reach their financial goals than previous generations. 68% of Zoomers with investments and 70% of those without investments claim the cost of living/inflation to be challenges that hinder their ability to meet their financial goals, as per the FINRA-CFA Institute study.
Getting in touch
Having come of age in a more inhospitable financial environment and with less disposable income than their predecessors, Zoomers tend to be more risk-prone investors than other generations. Many feel that taking risks is the only way to outperform the market, with 46% saying they are willing to take “substantial or above-average” risks according to the aforementioned FINRA-CFA Institute study.
The following graph shows how Zoomers and Millennials are more active in risky markets such as crypto-assets and NFTs than Gen X, while Gen X investors tend to be more exposed to mutual funds and individual stocks.
Source: PwC AWM & ESG Market Research Centre; FINRA and CFA Institute
As digital natives, it is unsurprising to see that almost half (48%) of Zoomer investors learn about finance and investments through social media, while 47% learn through searches on the internet.
Note: This graph is based on data from the report ‘Gen Z and Investing: Social Media, Crypto, FOMO, and Family’ published in May 2023 by FINRA and the CFA Institute. ‘Traditional sources’ is made up of University/College, Financial Companies, and Financial Professionals. The numbers in this chart were obtained by averaging those responses.
Source: PwC AWM & ESG Market Research Centre; FINRA and CFA Institute
Financial information on social media, like all social media content, is often sensationalised or skewed towards fatalistic or hyperbolic conclusions. It is common for financial influencers to promote certain financial products over-enthusiastically without giving a full picture of the risks or predicting market upheavals and failures that never materialise. This sort of attention-grabbing content is more favoured by algorithms that value clicks and eyeballs over factuality. For better or worse, this is where Zoomers’ financial attention is focused and where traditional asset managers will have to compete to enlist younger clients.
Still, finance professionals with responsible messages stand a chance. Zoomers claim that the type of financial content they most trust online is that which explains things clearly (according to 69% of Zoomer investors), where the source shares their own financial performance (52%), and is recommended by a trusted source (47%). All these are areas where asset managers can excel over non-professionals.
Compelling messages for troubled times
Given that Zoomers have only been adults in a post-GFC environment, and in many cases a post-Covid, world, macroeconomic and geopolitical headwinds have been a constant presence for many of them. For this reason, many are also pessimistic about their future finances, which is why asset managers must work to match financial products with high risk and returns to younger clients.
As Zoomers continue to come of age, they will become the largest generation in the workforce, and the asset management industry cannot afford to ignore them. Asset managers need to tune their messages to resonate with Zoomers by highlighting the issues and financial products that matter to them. So far, the industry has been somewhat lethargic to adopt messaging strategies on digital communications platforms, which has stunted their appeal to younger generations. It is high time for asset managers to focus extensively on social media and craft compelling messages which would resonate with Zoomers, investors and non-investor alike.
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