Gen Z and Millennials, compared to the older generations, are more “knowledgeable” when it comes to investing, saving and creating a retirement plan, according to Nuno Matos, CEO, Wealth and Personal Banking at HSBC.
“We have seen that Gen Z and Millennials start investing much sooner than their parents. They are quite knowledgeable; they take time to do their research and plan well for their retirement,” he told Arabian Business in an exclusive interview.
This is mainly because Gen Z and Millennials are more “digital-savvy” and choose convenience over comfort, he added.
Gen Z, Millennials more digital, but highly stressed about money
“Gen Z and Millennials are clearly more digital-savvy, and they like to handle their finances on mobile platforms in a very convenient way. To compete in this space, it is important for banks to deliver the best-in-class digital and mobile platforms and experience,” he explained.
According to a recent report by the Foundation for Economic Education, Gen Zers are building credit early through small loans like credit cards and auto loans, rather than large student loans like many millennials took on.
Their conservative approach to loans and finances seems to be learning from millennials’ struggles with high student debt loads and difficulties finding job, the report said, adding that, the age group is “highly stressed” about money, likely influencing their more cautious financial behaviours compared to previous generations.
“Gen Z and Millennials save and invest sooner as they know what they want to do with their money. This has many benefits – the sooner they invest, the more they can accumulate and get better returns. However, there is also another side to this – they are typically more willing to take risks. Sometimes, too many risks by trusting social platforms too much, and by investing in non-proven asset classes,” Matos said, adding that HSBC alone played a key role in opening over 70,000 Global Money accounts, their flagship digital account, since its launch in 2022 in the UAE.
“We have been increasingly investing in digitising our wealth services. Moreover, we have seen that Gen Z and Millennials start investing much sooner than their parents. They are quite knowledgeable; they take time to do their research and plan well for their retirement.”
Gen Z, Millennials to inherit $72 trillion during ‘Great Wealth Transfer’
In addition, Gen Z and Millennials are expected to inherit $72 trillion under the banner of the ‘Great Wealth Transfer’, a report by Fortune said.
While this inheritance will make Millennials significantly wealthier, many do not feel financially prepared or comfortable managing such a large sum of money. Only 21-42 percent feel very comfortable, depending on the generation.
Millennials and Gen Z in particular grew up during times of financial crisis and economic turmoil, making them more risk-averse. They are also concerned that inflation will decrease the real value of the inheritance.
The inherited wealth could dramatically improve Millennials’ financial situations but also cause problems if not managed well. Many may also receive less than they expect due to changing plans by parents.
Younger generations overall feel more financial anxiety than older ones. This anxiety may rise further as they take on caregiving responsibilities for aging parents in the future.
While they have time to plan for long-term goals like retirement, preparing to receive and manage an inheritance is more urgent for Millennials and Gen Z. Many do not feel ready to handle such large sums of money.
Wealth succession plan ‘critical’
This is why a wealth succession plan is “absolutely critical,” according to Matos.
“There are many angles to that [wealth succession plan] conversation. Typically, when wealth is created through the entrepreneurial efforts of the older generation, these companies become an integral part of who they are. So, to initiate a conversation of succession, it is sometimes a very challenging moment for an entrepreneur, as it is almost like giving up who they are. That’s what we need to understand. On the other hand, a good succession plan will ensure that the senior segment of the family is comfortable and will ensure a smooth transition and legacy continuation.”
However, Matos also explained that there are “many advantages” to legacy planning. These include asset protection, control and confidentiality. “Most of the times when you start a legacy planning exercise, you are able to control your finances better and you can achieve succession of assets in an orderly fashion. It also significantly reduces the likelihood of family disputes,” he concluded.
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