Panel II: Gen-Z will inherit the Earth – eventually
Generation Zers, born after 1997, are a fascinating bundle of contradictions. Wealthy but suspicious of money; digitally wired but lonely; empathetic yet easily distracted. But they’re trailblazers too and they will force companies, banks and investment firms to create products and funds that heal the world they inherit.
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If Generation Z doesn’t matter already, it’s about to. Defined by the Pew Research Centre, a US think tank, as anyone born between 1997 and 2010, Gen-Z, as the demographic is known, is large and collectively powerful.
It accounts for 35% of the world’s population, or three billion people, says San Francisco research firm Zebra IQ. Effie K Datson, global head of family office at Barclays Private Bank, reckons 93% of Gen-Zers influence household spending budgets, giving them an indirect spending power of $1 trillion.
They even have their own cultural rock star, Greta Thunberg, the Swedish climate activist who was born in 2003, bang in the middle of the demographic range.
But beyond the numbers, who are Gen-Zers and what do they want? Who do they listen to or ignore? What drives them? And what do they want from the corporate and financial institutions desperate to get their custom and secure their loyalty?
During Euromoney’s panel discussion, a number of compelling themes emerged.
Gen-Zers are “passionate, pragmatic and proactive” people who love to “align themselves with causes”, says Dominic Samuelson, chief executive of London-based Campden Wealth, an independent adviser to family offices and wealthy private investors.
They will enter the workplace at a relatively advanced age. James Sefton, professor of economics at Imperial College, tips them to “partner up later and certainly have children later than any other generation.”
[Gen-Zers are] passionate, pragmatic and proactive
That will influence how they view their lives and value wealth. They will live longer but so will their parents, so the full and final transfer of wealth between generations will be delayed until much later too. That offers challenges to this vast demographic and also to the financial institutions who serve them.
They are, of course, highly technologically literate. “This is absolutely the most digital native generation we have ever had,” says Barclays’ Datson. “They are very comfortable multi-tasking on five screens, compared to three for millennials.”
That impacts them in ways both positive and negative. On the one hand, they are rarely out of touch with friends and family. On the other, digital connectivity is different from old-fashioned tactile relationships.
Looking someone in the eye, creating bonds, sensing hostility and enjoying camaraderie matters. And for good reason Gen-Z, a group that spends so much of its time alone and online, is called the ‘lonely generation’.
Many of them grew up feeling anxious for other reasons. Even those shielded by wealth remember the global financial crisis and the years of austerity that followed. If their parents didn’t lose money or jobs, they will have friends who did.
That made them less likely to run up big student debts and this conservatism will influence how they manage their wealth and run family offices. Over time, it will surely impact how big corporates are financially managed.
But like hope, fear can drive innovation and change. This generation, probably more than any other, is motivated by a desire to make a difference. Gen-Zers “want to be involved”, says Datson.
They “love authenticity and creativity”, she adds – a fact that may encourage them to join startups rather than entrenched corporates or to start their own business.
This is the most digital native generation we have ever had
‘Sustainability’ is still ill-defined, but like technology it will be integral to everything we do, including the investments we make and Gen-Z will be at the heart of that process. A survey published in February 2020 by the UK’s Royal Society of Chemistry, found a quarter of people aged from 15 to 18 want to pursue a career that combats climate change.
“This generation sees it very much as a responsibility to use its wealth in the right way and to make the best and the most out of it – especially when it comes to tackling the biggest problems of our age, including climate change,” says Viola Steinhoff Werner, head of global next generation and families at Credit Suisse.
Gen-Zers know wealth can be used to have a positive and lasting impact. “When I look at the next generation... I see a true consciousness about wealth and money,” she adds. “This can bring a whole new perspective to conversations about investments within a family or with banks.”
I see a true consciousness about wealth and money
That allows banks to focus when talking with wealthy clients not on generational differences but on inclusion – for instance, by ensuring the next generation has a seat at the table when a family makes a decision that impacts their future.
Gen-Zers are different in other ways too.
They are coming of age at a time when wealth has a “massive stigma” about it, says Campden Wealth’s Samuelson. “The rich are the only minority that people feel free to speak negatively about in public without attracting criticism.”
They listen not to elders but to peers. The young listen to one another “when seeking to ascertain what they believe is right and wrong” adds Samuelson. “Recommendations from friends are key to their consumption habits.”
For private banks and wealth managers, this matters.
Financial service providers are desperate to secure the trust of Gen-Z, but it won’t be easy. For one thing, they are as a group less brand loyal than earlier generations.
It’s easy to dismiss their short attention spans, but this masks the ability to process large amounts of information very quickly. Gen-Zers are listening, just not only to you.
[They will] have children later than any other generation
And while they are grateful to banks that support a family enterprise, that faith has a shelf life. They will feel little remorse at culling the number of banks they work with and will favour financial advisers who offer specific skills.
“Banks will need to offer a full range of services, including... research and connection platforms and private investment capabilities,” says Samuelson. “They’ll have to hire technically proficient advisers and do enough to retain bankers for the long-term.”
They will also have to move beyond a sales-oriented strategy, toward a model that is more collaborative and consultative. With Gen-Zers, he adds, “there will be no shortcuts”.
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