New research released by global fund network Calastone reveals that half of millennials would, if it was offered, purchase investment products through a well-known technology company (eg Google, Apple, Microsoft).
Calastone’s study which surveyed more than 3,000 people aged 23-35 across the UK, France, Germany, US, Hong Kong and Australia also found that, for millennials who already actively invest, this figure rises to almost two thirds (63 per cent) globally and to a massive 71 per cent in the UK, which could have significant impact on the USD47 trillion funds industry*.
As well as placing trust in big tech, millennial investors in the UK also place a significant degree of trust in technology itself, with 52 per cent stating that they would trust a computer algorithm to invest their money for them. Interestingly, the UK came out on top as the most trusting of algorithm-based investing, with a higher percentage than peers in Europe, the US and Asia.
There is a clear trend that shows as young investors become more sophisticated, their willingness to buy elsewhere and to look at non-traditional players increases, indicating that loyalty to current providers does not necessarily increase over time.
This comes at a time when challenger banks and mobile money management platforms are drawing millennials – and their wallets – from mainstream finance. When it comes to investing, Calastone’s survey highlights that there could be a shift to “big tech” for the global funds sector. As other areas of financial services have reacted to the evolving needs and increasing tech-savviness of younger generations, the investment and funds world must also start to focus on the areas that make big techs’ successful, such as accessibility and user experience.
Whilst the Silicon Valley behemoths have yet to immerse themselves within the investment management world, they have encroached on other areas of financial services. The current regulatory environment may not deter big technology companies from moving into the funds industry given the scale of the opportunity, especially as trust in technology has never been so high.
Andrew Tomlinson (pictured), Chief Marketing Officer at Calastone, says: “With the knowledge that there is already a growing level of trust from millennials, who would consider buying investment products from big tech companies, the potential for the technology giants to enter the investment world only increases. Whoever controls access to the investor, controls the market. Fund managers and distributors need to be mindful of this.
Many big techs already offer basic financial products and in Asia we’ve already seen Alibaba’s, Ant Financial, entering the investment funds market and in doing so attracting a huge investor base to creating the world’s largest money market fund. Given the opportunity for these companies and the scale of their client base, other markets could follow. The industry should look at what makes these big techs so successful – accessibility with a positive user experience – and learn from that if it is to navigate the coming changes.”