New research on consumer attitudes and goals points to a post-pandemic financial awakening, especially for younger consumers, with big increases in a desire to save more and know more about the investment companies behind their funds. This is according to Hearts & Wallets, the market research and benchmarking firm that specializes in consumer saving, investing and financial advice.
The survey, “Attitudes & Sentiment: Strategies to Engage Investors in the Pandemic-Inspired Financial Awakening,” analyzes consumer sentiment, goals, concerns and attitudes toward saving and investing, with breakdowns by generation, gender, marital status, assets, competitive data and qualitative insights on the financial awakening.
Consumers Are In A Positive Mood
Three sentiment metrics are now at the highest level of the past decade, the survey showed, reflecting an overall positive mood about finances and investing.
- More than half of U.S. households feel no or little “anxiety about their financial situation as they look to their future.”
- Nationally, one in four households (28%) feels “very” or “somewhat experienced” with investing.
- More than a third (34%) of households feel “very” or “somewhat comfortable” in “accepting volatility in the hope of getting a higher return.”
Millennials Most Comfortable With Investment Risk
Millennials exhibited an eye-popping 11 percentage point increase in their feelings of experience as investors over the past year. This generation also is the age group most comfortable with investment risk this year, where previously they had been the group that was the most skittish.
Laura Varas, CEO and founder of Hearts &Wallets, offered some reasons for millennials’ increasing levels of comfort with risk. “The oldest millennials are approaching middle age as they turn 40, “she explained. “They are of an age where they are seeking to generate current income from their investments. Market contractions rocked this generation as they were coming of age during the Great Recession of 2008, leaving millennials extremely hesitant of the markets. Since then, millennials have seen steady improvement in the market.”
Millennials, along with Generation Z, are also the generations most likely to have their attitudes changed by COVID-19, Varas added. For millennials, this COVID-changed group includes 13 million households with a total of $1.8 trillion in assets. And they are more likely than the rest of the U.S. population to be interested in packaged products, to be worried about missing out on investment growth, and to be interested in the managers behind their funds. This indicates that advisors may want to tailor communications to this group in a way that responds to their financial awakening.
In addition, the financial industry can help millennials save more and invest more actively, added Varas. “Investment solutions should include international funds and packaged products and educate about the significant risks of crypto, options and margin investing,” she said.
Growing Financial Confidence Among Consumers
Apart from millennials, consumers overall demonstrated growing financial confidence, which parallels national increases in consumer receptivity about investing, the survey said. This includes bumps in enjoyment thinking about money, seeing value in paying for advice, and interest in fund managers. The interest in fund managers and a desire to save more saw the highest year-over-year increase, both up 6 percentage points, according to the survey.
Consumers are exhibiting a high level of optimism because of a variety of reasons, Varas pointed out. While qualitative research doesn’t illuminate the “why’s” as much as qualitative focus groups, given current economic and other trends, it may be that consumers are feeling better because a number of consumers have been able to save during the restricted activity of the pandemic, she said.
In addition, the jobs situation has continued to improve from where it was during the depths of the COVID-19 layoffs. Vaccines also have helped to provide some optimism about the pandemic, and the stock market continues to post excellent returns overall.
Impact Of COVID-19 On Attitudes Toward Saving And Investing
According to the report, three in 10 households said that COVID-19 has changed their attitudes toward saving and investing, especially younger generations. Forty percent of millennials and 44% of Gen Z agreed that COVID-19 has changed their attitudes toward saving and investing, versus 23% of baby boomers and 12% of the silent generation.
Top Consumer Goals
Building up an emergency fund and taking a vacation are still the top goals nationally. More consumers are citing investment and major purchase goals than in the past. In addition, capital preservation is growing steadily in importance with assets, while “generate current income” spikes in importance for households earning $3 million. More millennials cited investment goals than in the past, with their top goal being “generate current income.”
Fears And Concerns
Despite this overall positive mood, certain concerns are “popping,” the survey said. More than one in three households is highly concerned about inflation and possible tax increases. Inflation jumped into the top three concerns nationally, up 11 percentage points over 2020. In addition, concern about the U.S. deficit and future tax increases is up by 4%.
The report includes the latest survey wave of 5,794 U.S. households in 2021 and trended data of nearly 65,000 households dating back to 2010 in the Hearts & Wallets Investor Quantitative Database.
Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com.
© Entire contents copyright 2021 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.