CONTRIBUTORS
Sandy Kaul
Head of Innovation
Franklin Templeton
Robert Crossley
Head of Industry Advisory Services
Franklin Templeton
Alegria Apikelis
Senior Analyst
Franklin Templeton
Janice Deringer
Senior Analyst
Franklin Templeton
Samuel Huddart
Senior Analyst
Franklin Templeton
This is the ninth article in the Future of Investing series, drawing insights from our annual industry-wide survey, The Future of Investing.1 The Overview summarizing the top 10 key findings can be found here along with a series of articles, each exploring a key finding in more depth.
Preview
“Open advisory” would bring together capital and asset management and integrate third parties to enhance investors’ lives and wealth
Historically, the business of advice focused solely on the client’s investment portfolio, with advisors differentiating themselves on their investment expertise. That focus is shifting amid growing demand for financial planning, changing product fee structures, and expanding regulatory mandates requiring advisors to act in a client’s best interests. Today, advisors differentiate themselves on their ability to be broader financial experts—covering not just the investment portfolio but expanded agendas around retirement planning, estate planning, tax optimization, philanthropy and more.
Looking ahead, this range of offerings may need to expand further. But despite the many differences between the needs and preferences of those entering decumulation and Next Gen investors, one key requirement they have in common is the need for advice on how best to deploy their money and wealth to maximize the benefits to their life, not just allocating their investment capital. This need is only likely to grow with the potential of money, money-like and invested and directly owned assets all potentially being tokenized and moved into a commingled cryptographically protected wallet.
Baby boomers and Gen Xers riding out their peak earning years and moving into retirement will need to optimize their use of capital to cover living expenses, manage debt, enable key purchases and expenditures, invest and ensure inheritances. Success will be closely linked to having a budget, staying on top of day-to-day finances, having an emergency fund, and sequencing the drawdown of their accounts, while maintaining target investment allocations. Few, if any, of these strategies are part of today’s advisory services but could become foundational offerings as legacy wealth investors navigate their retirement and try to stretch the coverage of their nest eggs.
Next Gen similarly require assistance to manage money their money to fully optimize their use of capital. Money is already digital for most of these investors. A joint study from PYMNTS Intelligence and AWS found that 79% of Gen Z and 67% of Millennial consumers use a digital wallet. This compared to 44% of Gen Xers and 26% of baby boomers.2
How younger generations earn money is also different. A recent study showed that 53% of Gen Z and 50% of Millennials are embracing the gig economy, even when they have a main source of employment. Financial concerns are not solely driving this trend: 67% of those surveyed in 2023 claim they are pursuing their side gigs out of personal interest. Side work allows them to have better control over their work-life balance, and the ready availability of tech offerings makes it easy to run and maintain personal businesses. Top entrepreneurial ventures include digital marketing, tutoring, pet services, and selling handmade products or vintage items.3
Careful budgeting to ensure a pool of savings is a priority for Next Gen individuals. A recent NatWest survey covering 10,000 people across the United Kingdom found that 69% of Gen Z respondents set themselves a budget—compared to only 42% of baby boomers.4 “Loud budgeting” campaigns on social media and a predominance of “finfluencers” talking about fiscal responsibility are helping to drive this focus on savings and budgeting. Indeed, the NatWest study found that 74% of Gen Z respondents participated in a social media challenge to boost their savings.5
For more information or to request a presentation on the 2024/25 Future of Investing findings, please contact your Franklin Templeton representative or reach us directly at [email protected]
Endnotes
- On an annual basis, Franklin Templeton’s Industry Advisory Services team conducts off-the-record, unscripted interviews of leaders across the financial services industry. This year, we were fortunate enough to hear from 85 leading thinkers controlling over US$50.1 trillion of assets under management across the financial services industry about their views on the future of investing between March and September of 2024. Input came from a broad cross-section of the industry—asset owners, private banks, wealth managers, consultants, investment managers, crypto firms, academics, industry leaders and fintech firms. Conversations took place formally as part of free-ranging, qualitative, off-the-record, survey interviews, and informally during one-on-one sessions where the implications and plans for each organization are discussed and explored. Each of these inputs added to an emerging picture of an industry that is changing rapidly and across multiple dimensions. Interviews were conducted globally with about two-thirds of discussions held with leaders of firms based in the United States, and the other third spread between Europe and Asia.
- Source: "Nearly 80% of Gen Z Consumers Use Digital Wallets." Pymnts. April 3, 2024.
- Source: Jones, Howie. “Gen Z, Millennials increasingly embrace gig economy.” Baseline. July 18, 2024.
- Source: “Survey finds that Gen Z is the most likely to create a budget.” Fast Company. August 18, 2024.
- Source: Ibid
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Companies in the technology sector have historically been volatile due to the rapid pace of product change and development within the sector. Artificial Intelligence is subject to various risks, including, potentially rapid product obsolescence, theft, loss, or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims, and inconsistent and changing regulations.
Blockchain and cryptocurrency investments are subject to various risks, including inability to develop digital asset applications or to capitalize on those applications, theft, loss, or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims, and inconsistent and changing regulations. Speculative trading in bitcoins and other forms of cryptocurrencies, many of which have exhibited extreme price volatility, carries significant risk; an investor can lose the entire amount of their investment. Blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits. If a cryptocurrency is deemed a security, it may be deemed to violate federal securities laws. There may be a limited or no secondary market for cryptocurrencies.
Digital assets are subject to risks relating to immature and rapidly developing technology, security vulnerabilities of this technology (such as theft, loss, or destruction of cryptographic keys), conflicting intellectual property claims, credit risk of digital asset exchanges, regulatory uncertainty, high volatility in their value/price, unclear acceptance by users and global marketplaces, and manipulation or fraud. Portfolio managers, service providers to the portfolios and other market participants increasingly depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect the portfolio and their investors, despite the efforts of the portfolio managers and service providers to adopt technologies, processes and practices intended to mitigate these risks and protect the security of their computer systems, software, networks and other technology assets, as well as the confidentiality, integrity and availability of information belonging to the portfolios and their investors.