October 11, 2016
BREWIN DOLPHIN RESEARCH FINDS MILLENNIALS ARE LACKING THE RIGHT INVESTMENT APPROACH DESPITE THEIR MATURE SAVING AMBITIONS
6 October, 2016 – Despite their savings ambitions mirroring that of their parents, millennials in the South are going about it the wrong way according to Brewin Dolphin, one of the UK’s leading wealth managers based in Exeter.
In research conducted by YouGov on behalf of the wealth manager, which polled those aged 18-34 (‘millennials’) and the parents of millennials, both groups were found to have similar aspirations in their saving needs.
Saving for the future or a rainy day tops the table in terms of importance, with 81% of millennials and 72% of parents in the South agreeing that this is an important savings objective. This is closely followed by saving into a pension or for retirement with two thirds of millennials (69%) and 65% of parents in this region. Buying a house is also important for almost two thirds (62%) of millennials and nearly a half of parents (49%).
Despite their similarities in needs, their approach and attitude to investing and saving, and risk appetites, differ. According to Brewin Dolphin’s research, when looking at broad behaviours in the UK, parents and millennials fall into one of four camps. The majority of millennials (62% vs. 37% of parents) are found to behave like ‘Sleepers’ and ‘Casuals’ in terms of their investment behaviour compared to parents, most of whom act like ‘Risers’ or ‘Masters’ (44% vs. 28% of millennials).
In the South, over a fifth (22%) of millennials in the South are ‘Sleepers’, saying that they are not really bothered about their savings and investments at this stage in their life because they have plenty of time to think about that later. Only 6% of parents in the South feel this way. The majority of millennials in the South (40%) are ‘Casuals’ taking a passive approach to savings and investments. Parents in the country are more active on savings and investments, with 28% adopting a relatively active approach and 12% taking a very active approach.
An overview of the four categories is:
Sleeper – I’m not really bothered about my savings and investments
Members in this group may hold a savings account and/or a cash ISA. They may rely on a workplace or private pension and keep some of their assets in cash. They find equity investment risky. They have a low level or no understanding of savings and investment products.
22% of millennials belong in this category compared to only 6% of parents.
Casual – I take a passive approach to my savings and investments
Members of this group are likely to hold a savings account and/or cash ISA. Some do keep cash under the mattress. They are more likely to have a workplace or private pension than the Sleepers, but like them they see equity investments as risky. They have a low level or no understanding of savings and investment products.
40% of millennials fall into this category vs. 33% of parents.
Riser – I take a relatively active approach to my savings and investments
Members of this group hold a savings account and/or cash ISA, but they also may have a shares ISA and/or invest directly in shares. Some do keep cash under the mattress and the majority have a workplace or private pension. Parents and millennials in this group see equity investments are less risky than the Sleepers and Casuals. They also understand that they need to accept a degree of risk of financial loss in the short term in order to generate a better return in the long run. They have a better understanding of savings and investment products than the Sleepers and Casuals.
In Scotland, 28% of parents fall into this category compared to only a fifth (20%) of millennials.
Master – I take a very active approach to my savings and investments
Members of this group hold a savings account and/or cash ISA, but they also may hold a shares ISA and/or invest directly in shares. Whilst some do keep cash to hand, they are likely to have a diversity of investments, such as funds, bonds or property. A large number also have a workplace or private pension. They are unlikely to see equity investments as risky and most understand that they need to accept a degree of risk of financial loss in the short term in order to generate a better return in the long run. They have a good understanding of savings and investment products.
Whilst a tenth (12%) of parents are masters, only 5% of millennials can be classed as this.
“Despite popular stereotypes, parents and children are remarkably alike when it comes to their savings and financial goals,” comments Tim Walker, Head of Brewin Dolphin’s Exeter office. “Millennials are as serious about their savings, pensions and retirement as their parents are, and equally want to ensure that they get on the property ladder. Clouds however, loom, around fulfilling these savings objectives, with millennials far too laid back compared to their parents.”
Although interest rates are at a record low, the majority of millennials prefer to keep their money in savings accounts (63%), cash ISAs (35%) or cash under the bed or otherwise (34%). Virtually none are investing in mechanisms that may give the best returns over the long-term, such as stocks and shares ISAs (4% of millennials), investing directly in shares (2%), bonds or fixed-income securities (1%) or funds (5%). In contrast, parents are up to five times more likely than millennials in Scotland to have a stock and shares ISA (22%) or invest directly in shares (16%); a tenth invest in property (12%), funds (10%) and bonds or fixed-income securities (9%).
Mr. Walker adds: “With age on their side and a longer investment horizon, we would expect millennials to be taking more considered risk with their investments, such as equities. Instead, they are typically risk averse compared to their parents and seem content to put their savings into low yielding accounts or cash ISAs. For any chance of fulfilling their savings objectives and financial goals, millennials urgently need to re-evaluate their investment behaviours and, like their parents, consider higher yielding investments that could help them achieve those goals.”