The millennials are coming
19 Jan 2018 - Estimated reading time: 5 minutes
I am a millennial (the generation defined as being born between 1980 and 2000) and a part of one of the most studied generations to date. Over the years, we have been described as lazy, narcissistic, entitled and self-obsessed selfie lovers. Perhaps a little harsh?!
Personally, I don’t think we are that awful, but this might be too millennial of me! Our positive traits include being open-minded, liberal and passionate about equality. These positive traits may provide some explanation as to why a recent study by Morgan Stanley showed that millennials are twice as likely, as the overall investor population, to invest in companies targeting social or environmental goals. It also found that 86% of millennials are interested in sustainable investing, compared to 75% of the total population.
Hymans Robertson’s own research of millennials, gen X (born 1960s to 1980s) and baby boomers (born 1940s to 1960s) highlighted that millennials do care more than gen X or baby boomers that their savings are invested in a way that’s ethical, socially responsible, environmentally sustainable or that benefit the local community. However, like the older generations, millennials place just as much importance on their investments growing sustainably over the long-term.
Millennials are now entering the global work force at vast speed and I suspect that if you look to your administration reports you’ll see that we are becoming a sizable chunk of your DC pension scheme members. Your millennials are already here and the studies are showing that most want to invest sustainably.
There are many articles stating that millennials have driven the significant rise in assets invested in funds incorporating ESG factors (Environmental, Social and Governance) - The Principals for Responsible Investment (PRI) reported a 350% increase from 2010 to 2016. I am slightly sceptical of this view as most of us (there are exceptions) have little to invest! Perhaps it is more likely that we are underestimating the demand for sustainable investing from all investors? In fact the results from Morgan Stanley supports this view with 75% of the total population interested in sustainable investment. However, I do believe that millennials’ values will drive future demand for these funds, especially as our pension pots grow.
Facing such an increase in demand for these investment options, it should be no surprise that investment managers are responding with new products to the market, creating viable alternatives to existing solutions within DC lifestyle glide paths. In recognition of this increasing demand, and given the available solutions, it is important that trustees consider whether current DC strategies still fulfil all of their members’ requirements.
Millennials are more likely to consider a firms environmental and social credentials when deciding where to work. If millennials seek to work for such firms, they may also expect their benefits to be in line with the firm’s culture.
Pensions used to be a tool for both employee recruitment and retention but the proliferation of DC has served to reduce this. However, having a scheme which addresses both the financial and social objectives of potential employees means that, once again, pensions could be used to attract talent.
We are famously unconcerned by our pensions, given the various financial priorities which rank above our retirement incomes. I understand that this can make it almost impossible for trustees to engage effectively with us to improve our outcomes in retirement. So how else can you get our attention?
In order to better engage with millennials, trustees may wish to consider how the values of my demographic differ from other generations and especially the differences with those retiring today. Morgan Stanley found that millennials believe their investments can create positive change and 89% of millennials are interested in sustainable investments that can be customised to meet their interests and goals. This might suggest that engagement with our investments is not purely based on financial factors.
We want to see positive change and believe our investments can have an impact. Including measures of impact on key sustainability goals in pensions literature as well as financial return could result in greater engagement. This is a largely unexplored area of pension communications.
The millennials are already here.
We are your colleagues.
We are your current and future members.
And we want something more from our investments. I believe that trustees have an opportunity to use this difference to increase engagement in pensions with their own millennials.