The youngest generation in the workforce, Gen Z (often called “Zoomers”), has a unique set of values that set them apart from millennials. Known for their love of trends and social media, Gen Z can be a mystery for investors trying to reach younger audiences.
Keeping up with this generation’s values and internet habits is crucial for financial service providers. Here, we will explore Gen Z financial services trends, including the values that guide their decisions and the types of funds they are interested in—and explain what this means for your investment advising strategy.
Why Does Gen Z Investing Matter?
Gen Z is making a significant impact across various industries, surpassing millennials in influence and size. According to Morgan Stanley, “Gen Z, born between 1997 and 2012, will overtake Gen Y as the country’s largest cohort by 2034, ultimately peaking at 78 million.”
Not only are they a large group, but they are also the most tech-savvy generation ever. Growing up with the internet, they use technology to their advantage.
As older generations retire at high rates—dubbed “The Great Retirement”—Gen Z will soon become a major segment of the “potential customer demographic” for financial providers. Ignoring them would be a big mistake.
What Values Does Gen Z Use When Investing?
Gen Z is a highly political generation. They’ve led national movements like “March For Our Lives,” with 77% of the cohort having attended a protest.
Research shows that this value translates into their financial practices. According to Morgan Stanley, “90% of Gen Zers believe that companies ‘have a responsibility to address environmental and social issues.’”
However, the Motley Fool reported that “25% of Gen Z and Millennials reported owning ESG stocks, and 32% reported not knowing what an ESG stock is.” While this data may be skewed by grouping two generations together, it highlights an opportunity for investment advisors to help Gen Z understand how their portfolios can reflect their values.
As ESG investing becomes more common across generations, ignoring Gen Z’s influence in this trend would be a mistake.
What Funds Does Gen Z Care About?
According to NASDAQ, 73% of Gen Z own stocks, making them the most common type of investment for this generation. The same survey found that 15% of Gen Z investors use ETFs, 30% hold bond investments, and 22% buy index funds.
Due to their love for technology, Gen Z is particularly drawn to newer forms of investing, with 47% of the generation reporting owning crypto stocks.
Gen Z’s spending habits are also reshaping the market. A U.S. News survey of 9,500 Gen Z-ers found that their top public-owned brand was Starbucks (SBUX), followed by Chipotle Mexican Grill (CMG) and Nike (NKE).
How Can Financial Advisors Serve Gen Z Clients?
When attracting younger clients, it’s crucial to remember their reliance on the internet for advice and resources. Advertising on social media platforms like TikTok can attract more Gen Z customers. Companies should assume that this generation will research them on social media before doing business, so maintaining professional, clean social profiles is important.
It’s also important to ensure that investment opportunities presented to Gen Z clients can withstand scrutiny on social media. NASDAQ reported that Gen Z is influenced by “Finfluencers” (financial influencers) online who promise high returns on certain stocks. This led over 64% of Gen Z members surveyed to fall for “get rich quick” schemes, making them wary of too-good-to-be-true promises.
Challenges with Reaching Gen Z Clients
Since Gen Z turns to TikTok or other social media apps for financial education, they might ignore historical investing data in favor of new “Finfluencer” ideas. Their trust in online sources could outweigh their trust in advisors, causing frustration if advised against the high-return promises they see online.
Working with Gen Z means understanding the power of social media at a deeper level. Financial advisors must stay updated on trends, and companies need trustworthy online presences.
Keep Up with Younger Generation Investment Habits
The newest generation in the workforce will keep their financial advisors on their toes as they double- and triple-check opportunities on parts of the internet not usually used for investment advice. Social media and emerging technology will be essential to reach and cater to Gen Z.
The “Great Retirement” paves the way for Gen Z and millennial workers to dominate the market, with their interest in crypto and other alternative investments changing the financial industry.
Researching younger generations is crucial, and using analytics and reporting tools can help advisors stay on top of trends like sustainable investments and popular online banking apps.
Frequently Asked Questions
How is Gen Z changing financial services?
Gen Z is reshaping financial services with their unique preferences and expectations. They are digital natives who prioritize mobile-first experiences, transparency, and socially responsible investing. Gen Z is driving the adoption of fintech solutions, demanding personalized services, and challenging traditional banking models with their openness to alternative financial services.
What’s the biggest challenge in financial services?
One of the biggest challenges in financial services is navigating the constantly evolving regulatory landscape. Financial institutions must comply with a complex web of regulations aimed at protecting consumers, preventing financial crimes, and maintaining market stability. Keeping up with changing regulations, implementing robust compliance programs, and adapting to new regulatory requirements pose significant challenges for financial services firms.
