Millennials, those born between 1981 and 1997, are poised to become an increasingly important target audience for asset managers as they become the next generation of investors.
As millennials embark on their journey toward the future of investment, it is imperative for asset managers to recognise and understand the pain points of this generation.
In Thailand, millennials make up more than a quarter of the population and by 2025 they will account for 50% of the total workforce.
As a dynamic group, some of whom who will be inheriting generational wealth, millennials are also not shy about earning their income independently in order to create their own wealth. Believing in using the power of capital for good, millennials in developing markets want to make a change -- they want to see capital deployed to address the world's most pressing challenges such as climate change, health care and education.
This motivation is reflected in the larger overarching notion of investing in businesses with strong environmental, social and governance (ESG) principles, and in socially responsible investment (SRI).
These trends are most likely to continue to be attractive to millennials because the returns are measured not only in financial terms but also by the way such investments contribute positively to society and the environment.
As Southeast Asian markets continue to mature, investors will gradually seek more sophisticated offerings for their retirement portfolios. The region's millennial investors are no different, but they must start their retirement planning early.
Millennials expect to have a much longer retirement than other generations. Not only do they plan to retire early, they expect to live much longer, but longevity can be either a blessing or a burden. The higher the life expectancy, the more millennials will need to save for retirement.
This is where vehicles such as target-date retirement funds come in. Some feature both a target date platform and target risk platform. Members can choose age-based retirement investment options from the beginning and the fund manager will then pick the asset classes for them.
The focus is on asset allocation, investing the fund money in a variety of asset classes, automatically rebalancing the long-term portfolio to ensure suitability for the member's age range and providing investment plans for retirees.
An age-based fund is designed to provide a simple investment solution through a portfolio in which asset allocation becomes more conservative as the target (retirement) date approaches.
Although millennials in Thailand have seen the impact of the financial crisis of more than a decade ago and have also witnessed one of the strongest bull markets in history, half of them are not investing. The crux of the issue here is that many do not have knowledge about investing -- even the basics -- which translates to them being wary of investing. Putting aside cash for retirement is not top-of-mind for most millennials. They are too busy battling with debt.
Empowering millennials and preparing them with ample financial education to improve their financial literacy and understanding is essential for asset managers.
Making investing easily understandable and accessible is the key to overcoming this fear of investing. They should be encouraged to start investing now, early and often, for their retirement and for their future.
Win Phromphaet is the chief investment officer of Principal Asset Management.