Gen Z invests differently – how companies are reacting to it
Zaid Admani is a millennial and a civil engineer, and he tries to get young people to think about money – and their future.
Admani, 29, promotes financial literacy on TikTok. Under the profile “admani_explains”, he posts videos on the social network to his nearly 260,000 subscribers, discussing the latest news or investment concepts. In a video, he explained how PayPal PYPL,
co-founder Peter Thiel used his individual Roth retirement to raise $ 5 billion. In others, he explains how financial news can impact a person’s daily life, such as the last competitor in the streaming wars.
His followers asked him a wide variety of questions, including his opinion on a financial topic or just how to start earning, saving and investing at a young age. He’s partnered with financial brands, including online investment firm Betterment, to spark these kinds of conversations with younger viewers through sponsored content, which he gets paid for. He also joined forces with the public investment company.
Gen Z, born between 1997 and 2012, may be too far away from retirement to think about saving for it, but financial institutions are still trying to engage with them – in some cases, by working. with influencers on TikTok to talk about investing.
“Using social media is more good than bad,” Admani said. Yes, people shouldn’t blindly trust someone just because they have a large number of followers, but a demographic that might not have heard or talked about investing because they are. young or just starting his career will now be exposed to these discussions as a result, he added.
TikTok and other social media sites are a more informal and less intimidating arena to start learning to invest. “It’s just about meeting people where people hang out,” said Dan Egan, vice president of behavioral finance and investing at Betterment.
Admani isn’t the only one talking about financial news and advice on TikTok. Gil Oliveira posted a video on TikTok explaining how someone under 25 could withdraw a millionaire with a Roth IRA. TikTok creator Austin Hankwitz posted a similar post video for people aged 18 to 25. Adi Adara broke down the benefits of traditional and Roth 401 (k) plans into a video.
Retirement itself has changed a lot. The age at which someone retires is no longer traditionally 65 – for some people it’s years later, while for others it’s decades earlier. For most savers, the onus is on them to have enough money in their old age, as companies have moved away from retirement plans. Although financial experts urge workers to contribute to an employer-sponsored retirement account, like 401 (k), not everyone has access to such a plan. There is always a myriad of financial responsibilities that people have to deal with in addition to saving for retirement, like paying off student debt, balancing family obligations, buying a house or starting a business, to name a few – one.
TikTok is not the only way for financial institutions to engage with the younger generations who will invest now or someday. Companies that typically reach workers through workplace accounts or more traditional access points are looking for interactive ways to welcome new investors. This not only attracts new customers, but also keeps them loyal for decades as they progress through their careers into old age.
Fidelity Investments, a multinational financial services company, has created Fidelity Spire, an app to help users plan, save and invest with short and long term goals in mind. In the first quarter of 2021, new Fidelity retail investors aged 35 and under reached 1.6 million, an increase of 220% from the same quarter a year earlier.
“We are thrilled to see these young adults getting involved,” said Ashley Tran, team leader of investment solutions at Fidelity. “We see it as our responsibility to be there, to give them the right education and to make sure they feel empowered in their investment decisions.”
Overall, many companies see their young investors focusing on shorter-term goals. Young Fidelity clients are looking to pay for a wedding or start a family, for example, Tran said. On Betterment’s platform, young investors are also setting down investment goals for the car and home.
Financial institutions are watching what this new category of investors is doing or wanting now. For example, younger generations want to easily navigate a digital interface, but they also want access to many options for their portfolios, said Daniel Demian, financial advisor at Albert Investments, a financial planning app. This includes the ability to invest in new emerging asset classes like cryptocurrency.
For other new investors, it’s all about brand awareness. “The younger generations know very well who they do business with, so the brand really matters to them,” said Kate Wauck, vice president of communications for online investment firm Wealthfront.
Wealthfront recently added socially responsible options – something young investors have shown interest in, the data shows. In the first quarter of 2020, even during a global pandemic, there was demand for “environmental, social and governance” (also known as ESG) funds, according to Morningstar data. Millennials have led the charge for ethical investing, with about a third of this generation often or exclusively using investments that take ESG into account, a CNBC survey and Harris Poll reported.
The investment can be overwhelming – for anyone, at any age. This is yet another reason why businesses create online content, build apps, and work with social media influencers to engage these young newcomers.
Even when working with brands, viewers should see these videos as just a kickoff. It’s not always easy when people on social media post about triple returns or talk about the latest and most popular stock picks, but getting on the right track financially is imperative.
Familiarizing yourself with the creator is also necessary, Admani added. “It’s important to take that as a starting point,” Admani said.