The Next Generation Is Reshaping the Global Economy

The spending patterns and behaviors of the largest generation in history are redefining the ways of the world.


KEVIN DUNCAN Vice President and Associate Trust Counsel

Managing Director and
Portfolio Manager

COLLEEN SILVER, CFA Managing Director and Portfolio Manager

AMANDA VARDI Vice President and Relationship Manager

The spending patterns and behaviors of the largest generation in history are reshaping the global economy. Emily Dreas, Executive Vice President and Director of Client Development, captures insights on the millennial generation from several Fiduciary Trust professionals.

Q: How do you think this generation’s views about finances differ from those of their parents?
AMANDA: Working with multi-generational families, I’ve seen two different approaches. The older generations, having lived through many market cycles, tend to rely on their experience and past performance. That’s important to the younger generation too, but they also pursue up-to-theminute information about how current events—such as political changes, central bank policies or Brexit—might affect their investments. This may mean sharing an article or setting up a brief Skype call to discuss our perspectives and positioning.

COLLEEN: Millennials grew up during the financial crisis. Some therefore tend to be more skeptical and less trusting, and often take a more risk-averse approach toward investing. As the next generation of wealth stewards for their families, they do not want to be the ones who didn’t see another crisis coming. Education about how and why investing can help them achieve their goals is very important to get this generation past these fears.

AMANDA: This is the first generation to live in an era when technology is everywhere and information is readily available. However, there is a myth that because millennials are tech savvy, they look there for answers. While they actively gather information from these sources, we find many ultimately rely on the people they trust—their parents, family members and trusted advisors—for their actual financial decisions. Transparent communication and open and collaborative discussions are therefore extremely valuable to them.

COLLEEN: This generation is also values-based. Values can be consistent within families, but the next generation delves to a deeper level to express them. For example, they often want to support their views through their investment choices; so how this generation invests, where they invest and why, are both qualitative and quantitative for them.
Q: How have the social views of this generation motivated their investment thinking?
MICHAEL: The millennial generation seems to have a higher level of consciousness than most give them credit for. The knowledge they have about important topics such as macroeconomics or geopolitics is impressive, and it isn’t all that surprising. Millennials are characterized as the most diverse and educated generation to date.

Many of the younger generation clients I work with express a true sense of social responsibility which is also reflected in their preferences toward investing. Our generation seems to not only recognize the modern-day issues afflicting society, but also wants to be a part of the solution to fix them.

COLLEEN: My discussions with clients about the pros and cons of implementing socially responsible investment strategies are becoming more frequent. Investors are interested in finding investments that meet Environmental, Social and Governance (ESG) criteria, as well as screening to avoid things like fossil fuels or human rights violators. At the same time, transparency into companies’ behaviors is increasing. They may make choices to include socially responsible practices along their supply chains and incorporate sustainability to drive process efficiencies. We have seen indications that sound ESG practices may contribute to the long-term performance of companies, which will expand the conversations we are having about these investments even further.
Q: As conscious consumers, how are the preferences and choices of millennials transforming the investment landscape?
MICHAEL: Millennials are just now entering their prime earning years, so we expect their influence on the economy to become even greater over time. Trends driven by this generation will go far beyond online shopping and social media, although robust growth in these areas will likely persist for the foreseeable future. The desire to be authentic and stay true to personal values is a driving force behind millennials’ shopping habits and the products they want to associate themselves with.

We expect current trends such as the commitment to wellness and efficient technologies to be accentuated in the coming years, while newer developments such as person-to-person commerce and the shared economy have only just begun to take shape. Industries that are unable, or too slow, to adjust will fall behind quickly. The beer industry is a great example. Craft breweries have grown exponentially due to their popularity with millennials, while the traditional beer companies have struggled to keep up. 

Q: What does tax and estate planning look like for someone in this demographic?
KEVIN: When I have discussions both personally and professionally with others in my generation, I have noticed a sentiment that tax and estate planning can always be done tomorrow. As a result, our generation tends to wait too long to get started. For millennials at the beginning of their careers, the focus should be on saving, in particular via a tax-preferred account. No matter what their long-term financial means might look like, I always advise taking advantage of a workplace 401(k) or contributing to an IRA every year. If the employer matches contributions, it’s important to contribute at least as much as the company is matching—it’s free money. Choosing a Roth IRA or 401(k) can be especially beneficial if they are early in their careers and in lower tax brackets. The assets will appreciate over the course of their careers and be withdrawn tax free in retirement.

For those millennials further along in their careers such as myself, it is important to get estate planning documents in order. Now is the time to get a power of attorney, a healthcare proxy and a will or revocable trust. This is especially true for those with children. While we may feel too young to have a will, we’re never too young to be prepared.

Given the expected $30 trillion wealth transfer to younger generations, Fiduciary Trust is committed to understanding and meeting the financial needs of millennials, an estimated 83 million Americans.1 This generation is well-represented at Fiduciary Trust, comprising more than a quarter of our workforce, and we value these insights as part of our strategic discussions.

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