Business Tech

Generation Z: The autonomous generation

Financial planners had better get ready for Generation Z. The generation that grew up watching their millennial relatives drown in student loan debt and finds it almost impossible to imagine how someone could save for retirement, already appears more conservative with money, distrustful of financial institutions, and disinterested in traditional money management tools, according to one expert.

“They don't really trust authority, or at least they feel they are on their own,” said Marcos Jacober, gig economy expert and chief executive officer of Life Hacks Wealth. “It could affect attitudes with regards to established businesses and ways of doing business. Business will need to transform to serve Gen Z and to attract their business.”

Generation Z – those aged 13 to 21 in 2018 – spent a large portion of its childhood watching the Great Recession unfold. Researchers in recent years have brought “Gen Z” into focus, finding them to be more socially open-minded than previous generations, but with a deep skepticism toward authority. Pew Research Center, for example, found Gen Z survey respondents to lean left on virtually all social issues in a 2018 study. When it comes to money, however, Gen Z appears to be deeply conservative to the point that most begin researching financial planning at age 13. In contrast to millennials – who many in Gen Z view as spendthrifts with too little self-control – this new generation invests and shops with care.

The data also shows that Gen Z does more than just take care with the money they have. Majorities in Gen Z reported in various surveys conducted by Pew, Accenture, and others, that they plan to attend colleges that offer in-state tuition or heavy discounts, avoid student loans, and commute to school to avoid taking on debt. Additionally, 75 percent of Gen Z reported that they would take jobs out-of-state if it led to financial security, and 58 percent said they would work nights and weekends if needed. Gen Z members, an impressive 77 percent of them, also are likely to have a “side gig” such as a freelance job, earned allowance, or other secondary income source. The millennials’ experiences with student loans and underemployment appears to have made an impact on Gen Z, Jacober said.

henz400x600“Generation Z is more conservative with money than millennials and it's totally understandable,” he told “Advisors Magazine” during a recent interview. “They were raised during the recession. They have millennial cousins or family friends that are struggling to pay back their student loans. To avoid student debt, many Gen Z'ers are opting out of the traditional route of higher education and instead going straight into the workforce or pursuing more affordable online degrees.”

The financial services industry might struggle to reach Gen Z without a significant change in approach. Traditional stocks, bonds, and mutual funds hold little appeal to would-be investors who watched their parents, aunts and uncles, and grandparents get wiped out during the Great Recession. Likewise, property investments could cause some trepidation among Gen Z members who saw relatives go through foreclosure or who prize their mobility and ability to follow work wherever it leads them. Investment vehicles that reduce investor autonomy likely will be no-gos for Gen Z.

“Gen Z is more skeptical about traditional investments that are stock-market related. They tend to look for alternatives like the gig economy, cryptocurrency, solo-preneuring,” Jacober said. “They are prone to taking higher risks with alternatives that promote autonomy. For example, they were quick to invest in cryptocurrency because the idea of a ‘currency’ not controlled by government or banks was appealing. It's rebellious.”

One thing Gen Z does not seem to take seriously, however, is saving. Gen Z appears to have faith that money will come either through hard work or investment and so slowly saving over time has become a “forgotten practice,” Jacober said.

“With regards to saving, the Gen Z attitude is similar to millennials – they like paying for experiences … For Gen Z to hear that people ‘saved their way to retirement,’ it’s like hearing there were dinosaurs roaming earth,” Jacober said. “There may be bones left behind and proof, but it's not visible and ‘doesn't happen’ any more – at least not from their vantage point. That creates the resourcefulness attitude to do more as [financial security] can only come from their ability to get or generate funds to invest.”

genzquote350x250Gen Z’s self-reliance streak extends far beyond money. Whereas millennials are known for investing with online tools – the so-called “robo-advisors” – members of Gen Z have been found to be more hands-on in everything from making their own clothes to growing their own vegetables or biking instead of driving. Financial planners who market to clients with an angle toward taking away the stress of handling finances will find that message falls flat with Gen Z.

“Like millennials, Gen Z is definitely the ‘go it alone’ type, but it comes from a very different place,” Jacober said. “Millennials’ tendency toward using auto-invest platforms is not because they trust themselves over the experts. It's because it is cheaper and easier ... Gen Z's self-reliance is about autonomy. It's in their nature to fend for themselves because it is safer than depending on others. They do things for themselves because they are proactive and want to ensure stability.”

Businesses hoping to capture Gen Z revenue will need to adapt to their “go it alone” mentality. A financial advisor will not be able to simply show Gen Z the path to success, but will need to instead provide a set of tools that allow these young investors to take charge of their own financial futures. Managing the shift from advisor to facilitator will be the key challenge for any financial advisor looking to work with self-sufficient Gen Z investors.

“Prior generations have been as self-reliant as this one I suppose, such as the people coming back from wars and nearly rebuilding the country,” Jacober said. “But what’s fascinating is that we have Uber Eats and Gen Z would rather have a garden and cook plant-based meals they grew in their backyard.”

 

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