A new study from the Ontario Securities Commission (OSC) offers insights on barriers to investing for Ontario millennials and how the financial industry can develop and refine products, programs and services that respond to millennials’ needs.
“Our research findings indicate many Ontario millennials are feeling overwhelmed by investing and don’t know where to start. We hope this work will facilitate the development of products and services that are responsive to younger investors’ needs and help foster innovation and efficiency in the capital markets,” says Tyler Fleming, director of the OSC Investor Office, says in a statement.
The study, which was carried out by Toronto-based Upside Consulting Group, shows that millennials find it difficult to picture their future, are overwhelmed with options, and have little experience with investing.
So far, the financial industry has had limited success in overcoming these barriers. Even robo-advisors, which have been seen as one solution to encouraging millennials to invest, haven’t cracked the problem.
“The fact that robo-advice platforms report high customer acquisition costs and have yet to capture substantial market share suggests that the model also misses the mark in addressing behavioural barriers,” the report states.
The study spells out six principles that various constituencies — such as industry firms, advisors, fintechs, and corporate HR departments — could apply to try to better engage millennials in investing.
Thesse principles include:
- Help millennials uncover a personal motivation for investing;
- Make it easy for them to get started with investing;
- Help them understand how current decisions could impact their future;
- Use social comparisons to promote achievable investing habits;
- Allow low-stakes experimentation to build their confidence and motivate progress; and
- Inspire trust by putting the investor’s needs first.
“The aim of design principles is to start a conversation about how programs, products and services might be delivered in more human-centred ways that will better engage millennials in investing for their future,” the report states. “They are intended to inspire stakeholders in all parts of the investing ecosystem — from investment firms, to organizations delivering investor education, to fintech startups and others — to test new models, observe how their users respond and continue to learn and adapt.”
The report also suggests that the principles identified in the research could extend to other generations.
“While we believe the design principles that have emerged from this project offer a starting point that is particularly relevant to engaging millennials in investing, this approach has implications far beyond the millennial cohort. Saving rates of Ontarians have been declining steadily for a generation and the behavioural foundation of our design principles should be equally relevant to promoting investing among other cohorts,” the report states.
The study follows Missing Out: Millennials and the Markets, a November 2017 research study by the OSC, which found that only one in two Ontario millennials have investments, with many non-investor millennials citing lack of knowledge of investing and fear of losing money in the markets as reasons for not investing.