At times, reading stories about the investing habits of young people can feel like a game of buzzword bingo. Gamestop. TikTok. Stonks. Bitcoin. WallStreetBets. Dogecoin.
But as a member of Gen Z and co-founder of a fintech company, it is frustrating to see such significant demographic changes reduced to cliches and an unhelpful narrative that young people are all irrational investors, completely different from older generations.
Surface-level commentary obscures the important differences—and similarities—between generations. Put simply it is hard to separate the signal from all the noise. Ultimately, this makes it more difficult for the financial services industry and financial advisors to understand and cater to younger generations.
And the risks of getting millennials and Gen Z wrong couldn’t be higher. These generations are too big and too important to misunderstand or reduce to stereotypes. Millennials are already the largest generation in America, and over the next 25 years, more than 45 million households will transfer more than $68 trillion in wealth between generations.
Is it truly surprising that millennials and Gen Z are skeptical of Wall Street and “traditional” investing, given what they’ve seen?
Already they’ve experienced two of the worst economic crises in history, seen Big Finance taken to task for irresponsible behavior, and seen their student debt rise to crippling levels while their wages have stagnated. A 2018 Federal Reserve study summarized it saying, “millennials are less well off than members of earlier generations when they were young, with lower earnings, fewer assets, and less wealth.” What’s more, new research from Credit Suisse reveals Gen Z can expect average returns of just 2% in the coming decades compared to 5% of past generations.
If it also seems like the newer generations see the world in different ways, it is because in many ways they do. Millennials and Gen Z are the most racially and ethnically diverse, the best educated, and the most socially progressive according to studies from the Pew Research Center. They are buying products, choosing where to work, shaping their lives, and investing based on their values.
The combination of mistrust of financial markets and the rise of new technologies has accelerated the adoption of new investment categories and trends, whether that is turning to Bitcoin instead of gold or trading through apps like Robinhood instead of traditional brokers.