Displaying items by tag: millennials

Schwab conducted a survey among its ETF-investing clients. Among the takeaways is that Millennial investors are quite partial to ETFs, relative to other generations. 37% of their portfolios are allocated to ETFs. 89% said ETFs were their investment vehicle of choice, while 25% of Millennials plan to increase their exposure to ETFs next year. 

Another interesting finding from the survey is that Millennials also have a strong interest in more personalized investment options. 88% said that they are somewhat or very likely to personalize their portfolios. 78% want their investment to align with their personal values. This is much higher than older generations. 

The survey also showed substantial interest in direct indexing among Millennials. This isn’t too surprising considering that 65% of Millennials said it’s extremely important to have more control over investments, 61% want greater ability to customize their investments, and 61% want their investment to be managed to optimize taxes. 

Currently, 87% of Millennials are familiar with direct indexing, an increase from 80% in last year’s survey. Additionally, 53% of Millennials are extremely interested in learning more about direct indexing, while only 34% of Gen X and 22% of Boomers feel the same way. 69% of ETF investors, not investing with direct indexing, said that they are likely to invest in one next year. For Millennials, 80% feel this way.

Finsum: Schwab conducted a survey among its ETF-investing clients. Among the findings, Millennials are partial to the asset class and also have strong interest in direct indexing. 

Direct indexing has been around for 30 years but was once only accessible and viable for ultra-high net-worth investors. Now, technology and lower transaction costs have made it available for a much wider swath of investors who are able to benefit from direct indexing’s tax-loss harvesting and customization abilities.

Interestingly, the strategy is finding particular favor among millennial investors who are interested in tax optimization and personalization which are not possible through traditional passive investing. Advisors can customize holdings in a way that reflects a client’s values and preferences such as prioritizing ESG criteria or adjusting a portfolio based on a client’s risk profile. Holdings can also be customized to account for a clients’ unique financial situation, which is also not possible through investing in ETFs or mutual funds. 

For advisors, it presents an opportunity to differentiate themselves in a competitive landscape by offering personalized and optimized solutions. Direct indexing is likely to continue growing as it’s becoming increasingly available through many online brokerages and wealth management firms. It’s also consistent with many younger investors’ desired preference to have their personal holdings reflect their values and beliefs. 

Finsum: Direct indexing is growing at a rapid pace, and it’s finding favor with Millennial investors due to its tax optimization and personalization.  

Charles Stanley is diving deeper into ESG with a new suite of model portfolios geared at responible passive investing. Jane Bansgrove will manage the model portfolios and is the investment director of Charles Stanley’s responsible investment committee. Studies have shown that many have put more emphasis on ESG and sustainability due to the Covid-19 pandemic. The funds will be available across different risk levels with different target growth rates that correspond to them. They are designed to be low cost and efficient like many other passive ESG funds.

Finsum: Model portfolios are a natural marriage with ESG, because thematic investing caters itself to a model that can make selections.

Most think of millennials and they compartmentalize them into 3 categories: fee minimizers, crypto /alternative investors, or meme traders. However, a recent poll shows they have a strong desire for traditional income products. Over 82% of more affluent millennials are concerned with finding income products for retirement, which is almost 30 percentage points higher than Gen X. Additionally, almost a quarter of the poll were willing to purchase an annuity in the next quarter, and half of those were millennials. Many of these affluent millennials are looking to income products because they are skeptical that social security will be there for them in retirement.

Finsum: Millennials are bucking conventions and looking early to secure income products like annuities.

We’re in the middle of the largest generational wealth transfer of all time. The Baby Boomers, previously the largest living generation, are expected to pass down roughly $68 trillion over the next 25 years to the Millennials...see more on our partner's site