Bulls And Bears Abound, But Gen Y Is Another Story

Big ideas from this spring’s Finovate conference can help young, first-time investors connect with the stock market.


Despite often being one of the first demographic groups ready and willing to put money behind the next big thing (crowdfunding and Bitcoin, for example), a startling number of millennials remain critical of one of the oldest and most successful investing channels — the stock market.

In fact, according to the U.S. Trust’s 2013 Insights on Wealth and Worth study, 51% of Gen Y-ers surveyed found investing in the stock market “overrated,” and the same percentage felt they would never be comfortable with it. By comparison, only about one in 10 baby boomers felt the same way.

Given their creativity, desire for success, and thirst for knowledge, Gen Y-ers can be a profitable segment for financial institutions to target, advised speakers at last month’s 2014 Finovate Spring conference in San Jose, CA.

But to help Gen Y help itself, credit unions need to understand how this group's interests and priorities differ from more established investors.

Difference No. 1 — Gen Y Is Desperate For Good Advice

Although not representative of the average American’s financial situation, last year’s Fidelity Millionaire Outlook survey reveals this startling tidbit — 92% of millionaires from Gen X and Y use a financial advisor compared to just 68% of millionaires from other generations.

This preference for investing help is likely shared by Gen Y members of all income levels, not just the wealthy. In fact, millennials with fewer financial resources might be even more aggressive about seeking advice from alternative communities of trusted peers, including local financial institutions and one another.

Using social media to learn about investing was a recurring theme at Finovate, where several companies demonstrated new platforms designed to aggregate and analyze social media commentary as a resource to anticipate individual company performance and upcoming market shifts. In many cases, these online communities also allow beginning investors to connect with and follow in the footsteps of their more established peers.

“Tweets move markets, but the problem is noise and trust,” said Igor Gonta, CEO of New York-based Market Prophit, speaking to conference attendees.

Although access to overall market sentiments can be useful, the real challenge is connecting with that “smart money” segment that can predict outcomes a bit earlier, he said.

Difference No. 2 — Gen Y Wants To Invest In Ideas … Not Funds

Millennials are socially conscious investors who use more than hard numbers to calculate returns; this generation also wants investments that reflect its values and beliefs in certain brands or ideas. Simply put, Gen Y wants to make money while also making the world a better place.    

“I’m investing my money in communities and in people," a young investor told the New York Times last September. "If I lose some money in that but people are getting paid great wages, great.”

The problem for these investors is finding investments that satisfy their financial goals as well as their interests — something the current market architecture does little to support.  

At Finovate, companies sought to address these concerns in a number of ways. California-based Motif Investing replaces individual stocks with themed blocks of stock that investors can customize based on their interests and values. TD Ameritrade and Kentucky-based LikeFolio start with the brands and products consumers know best and then work backwards to connect investors with the companies and investment opportunities behind those icons.

Whether a credit union relies on outside aggregation tools or challenges its employees to prod deeper into their clients’ priorities, the key to success is to limit the amount of legwork young investors must do themselves.

“You don’t want to send them all across the Internet just to learn about a specific fund,” advised David Levine, the CIO of a New York-based curated investment platform called Artivest.

Difference No. 3 — Gen Y Often Needs An Outside Push To Get Started

Many people know they should invest, yet few do. And for a generation notorious for its procrastination and codependence on friends and family for key decision-making, getting started in investing is often the hardest part. That’s why California-based Stockpile combines the convenience of giving a gift card with a process that initiates real stock ownership.

Armed with only a credit or debit card and an email address, buyers can select set dollar amounts of stock from all S&P 500 companies as well as other investment options and send that stock as a gift to anyone they want. The recipient can then convert the stock into a gift card, exchange it for the same dollar value worth of stock in another company, or sign up for a brokerage account to redeem the investment.

For credit unions, these options provide an alternative to the gift cards or cash prizes used in employee and member promotions while also helping financial advisors and investment staff open up a new dialogue with their young clients.