An untapped seam for digital wealth managers to attract millennial investors

By Daniel Lanyon on Wednesday 18 October 2017

Savings and InvestmentAlternative LendingDigital Banking

Those born in the 1980s and 90s care most about the ethical impact of their investments.


Millenials are twice as likely to back ethical investments in their pensions than older generations, according to a recent YouGov poll.

The data show 13 per cent of 18 to 34 year-olds with a pension think it’s their responsibility to ensure their money is invested ethically. This compares to 6 per cent of 45 to 54 year-olds, and 7 per cent of over 55s.

The challenges of mitigating climate change as well as the impact of today’s ethical choices for future generations and sustainability seem to be a key concern for this tech-savvy demographic.

When it comes to identifying which companies to invest in, they understand that it’s not just about what companies do but also about how they do it. For example, more than 44 per cent of millennials believe that backing ethical firms could bring about positive social change, compared with 34 per cent of investors overall.

Does this mean that the investment community needs to understand how to cater for this new social and environmental-conscious investor?

For robo-advice platforms and digital wealth managers the number should be noted as a majority do not offer “ethical” focused portfolios or market themselves heavily towards to this spectrum unlike a growing number of 'traditional asset and wealth management firms.

Claudia Quiroz, Investment Director and lead investment manager for Quilter Cheviot’s Climate Assets Fund says Generation Y (millenials) understands that equal or better returns can be achieved by investing ethically and caring about the environment.

“Often people mistakenly believe that they will be penalised with poor returns if they have strong ethical values when it comes to investing," she said.

“There are many ways to gain exposure to investments that underpin particular ethical values and have a positive focus on the environment. For example, supporting companies that produce products to reduce carbon emission across industries is a good place to start," she added.

Nutmeg, the market leader in the digital wealth management space in the UK says a key obstacle for the firm is the "lack of conformity in what Socially Responsible Investment (SRI) criteria" should be applied.

"For instance, some funds would include oil companies because of positive steps taken on corporate governance, while others would exclude big oil companies. Every fund is run along different screening lines," the firm says on its website.

"Moreover, the lack of choice in investment products and the on-going costs of the funds, which tend to be much higher than the circa 0.19 per cent for our current portfolios, make this a difficult service to launch at the moment".

The firm is working on a fix though, it says, and is "still determined to meet the need for an ethical portfolio service, it is just taking us a lot longer than we would have liked".

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