It’s important to treat millennials as tech-savvy, intelligent investors, because the transference of trillions of dollars in wealth will happen over the next 20 years. Over that time, millennial money will become the most influential factor driving our economy.
Millennials have unprecedented access to information through connected devices, and they have also seen enough financial turmoil to harbor a healthy distrust of Wall Street. They witnessed the Enrons and the WorldComs fell apart, and then they observed regulators’ inability to rein in financial markets in the aftermath.
More than ever before, millennials are investing in products they actually use and shunning those that are dishonest. For example, social justice warriors organized and created interactive maps of the environmental impact of Volkswagen (VOW3) of America’s emissions cheats before VW itself was able to compensate its own consumers, much less the Environmental Protection Agency.
The recovery from the housing crisis; the implementation of the Jumpstart Our Business Startups (JOBS) Act, marking the first time in 80 years companies can advertise their securities; and various other market factors culminated in a greater social awareness. People are becoming more responsible overall, and money isn’t the only piece driving this.
Investing in Social Responsibility
Millennials have a much more substantive view of their money, paying more attention to where they spend, consume, and invest. The future of investing has a negative predisposition toward Wall Street and the traditional investments it represents.
As a result, millennials have turned their focus to impact investments, or those meant to make a profit by generating social and environmental improvements. Crowdsourcing platforms such as Kickstarter and RocketHub helped demonstrate that millennials could access investments without financial advisers or banks. With the advent of the JOBS Act, millennials can now cut out the middlemen altogether and funnel more funds directly into organizations across financial services.
People are beginning to be drawn to companies that are trustworthy, transparent, and led by great management. These are the key ingredients companies need to make a profit.
And even if a company isn’t directly listed as an impact investment, Millennials are investing in the business because it’s an honest company focused on corporate social responsibility. So how can businesses position themselves similarly to gain that Millennial buy-in?
Attracting Millennial Capital
As millennial capital grows, more and more companies will remain true to their missions in how they operate in the real world. Those companies will be rewarded with higher valuations and cheaper access to capital. Organizations that attempt to cheat the system to make a profit at the expense of the general public will continue being outed, and the consequences will only grow harsher.
The marketplace between consumers and investors is what drives the behavior of corporations, not the other way around. Corporations used to overcome consumer objections through expensive marketing budgets, but the free information readily available online makes that all but impossible today.
It’s no longer conceivable to tell people what they should buy; too many wholesome options are available, and the companies behind them are run more efficiently than ever before. Knowledgeable consumers are becoming savvy entrepreneurs and offering any and every service a corporation won’t.
This paradigm shift is putting more and more money into the coffers of Millennials, who are constantly rethinking the purpose of their investments. Millennials invest on the basis of their core values over data trends and market analyses utilized by the wolves of Wall Street.
Large corporations like Unilever are already picking up on these trends and are responding by allocating more resources toward developing sustainable solutions. Touting a company as green or diverse used to be enough, but now those should already be a given.
Corporations can no longer just hire a female CEO, spend some money on advertising, and hope their problems go away. Millennials have their fingers on the pulse of social awareness, and they let their money do the talking like no generation before. A lot has been said about millennials. It can often be derogatory, as older generations struggle to understand how the younger generation thinks and as the younger generation trudges through the growing pains of taking control of the workforce.
Regardless of your feelings toward millennials, they’re becoming a larger and larger part of wealth distribution. Where they spend their money is quickly changing the way business is done — and corporations should follow suit or risk becoming obsolete.
Vincent Molinari is the co-founder and CEO of GATE Global Impact, a leading electronic marketplace platform that’s helping the world’s leading organizations to standardize and accelerate impact investing. Vincent is also a managing partner at Constellation Fin Tech, and he consults with members of Congress and regulatory agencies on issues related to capital markets, early-stage companies, and secondary market liquidity.
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