The wealth management industry must use the power of ESG to encourage younger people to invest, after research found the majority of under-25s believe investments should aim to positively impact the environment or society, says PIMFA.
According to research from the Under 40 Leadership Committee at PIMFA, 72% of investors aged between 18 and 25 say all, or part of their existing investments should aim to have a positive impact on the world, compared to just 29% of those aged between 56 and 75 and 21% of those aged over 75.
ESG issues were also shown to be more important to women than men when investing, with 86% of women across all generations saying it was a factor in their investment strategy. But while women showed an overwhelming desire for their wealth to provide meaning, there was also a significant gap between men and women with respect to their levels of confidence and knowledge when it comes to investment decisions. More than a third (37%) of women say they do not invest at all, compared with 26% of men.
In contrast, younger people were found to have higher levels of confidence when investing, with 40% of investors aged 18 to 25 opting to invest in assets such as cryptocurrencies and just 19% choosing to invest in premium bonds. In contrast, 43% of investors in the 56 to 75 age range and 60% of investors 75 and over hold their investments in premium bonds.
Liz Field, chief executive of PIMFA, said: “One of the more pronounced effects of the Covid pandemic was the marked interest in all things environmental, social and governance and this has largely formed the basis of our research this year. It also highlights a number of key indicators as to how best to address both the ‘advice gap’ and the stimuli required to get different generational groups investing with confidence.
“Of particular interest is how the five basic generational groups differ in their responses to the environmental and social categories of ESG but the report also takes a closer look at the differing behavioural patterns of men and women when it comes to their investment decisions.
“What is clear is wealth management industry has two big opportunities firstly to harness ESG investing as a catalyst to encourage more women to invest and secondly, to use ESG as both an educational and practical tool to stimulate a much broader culture of savings and investment in the wider market, in turn addressing the ‘advice gap’ which is hampering our industry.”
According to the wealth management trade association, wealth managers and advisers need to make greater effort to communicate with younger investors, developing new methods of reaching out including social media channels such as Instagram and Tik Tok.
The vast majority of investors across all age groups agreed the most effective time to begin learning about investments and savings was at school, while a low-cost professional advice service was also shown to be appealing.
