The Rise of Gen Z Investors: Transcending Today’s Investment Landscape
A fresh perspective from a new batch of investors has positively impacted the ecosystem, so much so that even after a global financial crisis, the financial services industry remained resilient and thriving. In recent years, a generational cohort of promising young investors has been penetrating the finance sector and setting phenomenal trends that are now making waves in today’s investment scene–a headway that is attributed to the rise of Gen Z investors.
Gen Z is a wide-ranging generation of diverse individuals loosely belonging to the 1997-2012 birth year bracket. The experimental yet savvy characteristics of this generation largely contribute to the upward growth and shift of the investment landscape. More recently, Gen Z investors have become key players in the financial markets, setting greater expectations for brokerage than any generation before them.
Since the turn of the century, financial organizations have been experiencing drastic changes in the sector, and stockbrokers, as well as financial advisors, have had to keep pace with the many advances in technology; the introduction of the first Bloomberg terminal in 1982 made the industry progress year on year. And in the last two years, a record number of investors were seen entering the financial markets. This development is attributed to the global pandemic and the rise of FINfluencers or people on social media who use their presence to promote financial products by producing personal finance and other investment-related content.
In March 2021, there was a record high of 1.25 million retail traders in Australia: 400,000 of which have reported placing their first trade in the previous 12 months. These numbers are driven by younger participants where fifty percent are Gen Zs who have stated their appetite in investing. Wealth management in Australia is projected to experience transformational change where millennials and Gen Zs–the “digital natives” of the industry, are expected to play a vital role in.
To accommodate the change in retail trader demographics, brokers have had to evolve. This has led to the rise of digital-first Neo Brokers who offer easy–to–use apps, fast onboarding, and most importantly, a no–commission trading. However, some international Neo Brokers such as Robinhood, have been exposed for utilizing a payment for order flow (PFOF) business model, and are subsequently being investigated by the SEC. As the ASX doesn’t pay for order flow, Australian brokers such as SelfWealth, Opentrader, and Superhero will be protected from regulatory changes.
Whilst Generation Z might not currently have the investing power as that of the older generations, this is expected to change as baby boomers pass on $224 billion a year through inheritances by 2050. Compounded by this is the increase in compulsory super contributions by employers; there is no doubt the coming generations will want more control over where their super is being invested.