Young Adults, Emerging Technology,  
and Investing:
The New Way of Doing Business

By David A. Morrison
TWENTYSOMETHING^™ Inc.

Introduction

The worlds of investing and emerging technology are rapidly converging with today’s 18-34 year olds aggressively paving the way. Young adults represent both active investors, more than any preceding generation at that age, as well as the greatest concentration of early adopters for emerging "high-tech" products and services. Of particular importance, TWENTYSOMETHING^™ INC.’S groundbreaking TECHINVE$T^™ Study has also uncovered the fact that young adults of the new millennium are leveraging technology to gain a competitive financial advantage that was pure science fiction only a few years ago. (This may partly explain why 1/3^rd of all U.S. millionaires are 35 years of age or younger.)

Since space constraints preclude sharing the full 150 page report, this article will focus on summarizing one key chapter which segments today’s online young adult market into three distinct investor profiles:

• "Upwardly Mobiles"

• "Curious Bystanders"

• "Indifferents"

Such market dissection provides a rarified and insightful glimpse into the current (and future) market potential of young adult consumers, their unique subcultures, and the awesome paradigm shifts that are starting to reverberate in industries as far reaching as banking/insurance to personal computing and wireless communications.

The TECHINVE$T^™ Report is based on a recently completed survey of young adults, investing, and technology (conducted among a nationwide sample of 18-34 year olds, all with Internet access). Most significantly, we uncovered the fact that neither age nor income function as the sole indicators of investing involvement or preferred technology "tools". While the emotional maturity and personal net worth of a consumer can have a profound impact on investing behavior and related product usage, how a particular respondent perceives the importance of financial planning can play an equally important role – if not more so.

Setting the Stage: The Perceived Importance of Financial Planning

Most of the 18-34 year olds interviewed online feel that financial planning is an activity that shouldn’t be treated lightly. When asked to rank its importance, responses skewed towards "Extremely Important" (as seen in the following chart) with 39.1% of the respondent sample providing a top-two box score rating and nearly one-quarter (21.7%) providing the highest possible rating (Figure 1).

By segmenting the responses based on perceived importance ratings, we created three "skeletal" labels. Our firm then took a relatively novel approach to uncover statistically projectible (and strategically relevant) information to flesh out the skeletal classifications. Carefully constructed data mining strategies were blended with interpretative extrapolation based on TWENTYSOMETHING^™ INC.’s exclusive focus on the young adult market and multi-category experience as well as respondent verbatims elicited by the survey.

As Figure 2 indicates, at least 82.9% of the young adults online appear primed to invest or are already actively engaged in such activities. This cornerstone finding corresponds to ongoing research which indicates that today’s young adults are both saving a greater percentage of their incomes and doing so at an earlier age than preceding generations.

While "Upwardly Mobiles", "Curious Bystanders", and "Indifferents" may very well exhibit several overlapping characteristics reflecting a generation’s collective consciousness, a comprehensive look at these subsets clearly reveals that each subset has unique needs, preferences, fears, and aspirations. Moreover, each profile reveals a distinctive relationship with emerging technology as far as personal investing/finances are concerned.

"Upwardly Mobiles"

Comprising 39.1% of the sample, Upwardly Mobiles are acutely aware of the importance of long-term financial planning. Comments from this group reflect a high degree of category sophistication as well as involvement. Upwardly Mobiles are more likely to be older (45.3% are 28-34 years of age) and nearly twice as likely to be married (35.8%) versus the "Indifferents". This subgroup is demonstrably more likely than the other subsets to use emerging technologies to become more educated on the topic of financial planning as well as to conduct research and complete transactions. As the following respondent quote indicates, Upwardly Mobiles are quick to embrace the Internet because of its inherent benefits for convenience, increased control, and greater productivity.

Upwardly Mobiles are fiercely independent, and they view proper financial planning as a means of minimizing future financial uncertainty (i.e., the path to personal empowerment). The underlying behavioral driver is the quest for self-control over their professional and personal lives. There’s an underlying fear of being "trapped" in a job later in life that can be mitigated with early (and aggressive) planning in the present. They acknowledge living in a chaotic and uncertain world and recognize that early financial planning can provide both near-term as well as long-term peace of mind.

Upwardly Mobiles are bearish on Social Security and believe that other future supplemental sources of income are absolutely essential. This subset believes that it will need additional sources of income above and beyond Social Security to comfortably retire; this mindset represents a dramatic departure from past generations. Such pessimism regarding the future of Social Security is well founded since the U.S. government reports that the program is expected to become insolvent in 2038 A.D. To add perspective, today’s 18-34 year olds would be between 55-71 years old at that time – precisely at retirement age when Social Security income will be needed most.

"Curious Bystanders"

"Curious Bystanders", comprising 43.8% of the young adults interviewed, are modestly interested in financial investing but haven’t been fully activated. We believe that this market segment exists in such magnitude because it continues to be overlooked by the traditional financial/investing community. "Curious Bystanders" are more likely to be older (47.3% are 28-34 year olds), male (61.8%), and twice as likely to be married (39.7%) versus the "Indifferents". Given their concerns about future financial independence, this market is primed for on-target advertising and marketing.

Curious Bystanders represent a unique new business opportunity because they have little brand loyalties (if any) and would be highly receptive to the first firm that addresses their specific mindset and lifestyle. This segment would require a somewhat different call-to-action. A two-pronged message that (1) highlights the relationship between long-term planning and personal freedom, and (2) demonstrates that such planning can begin with a small amount of money could trigger this large, dormant market. We strongly believe that a category first-mover with an on-target implementation strategy could generate an enviable long-term competitive advantage. An industry leader could further increase market penetration or a relative category newcomer might be able to generate instant marketshare.

"Indifferents"

"Indifferents", comprising only 17.1% of the sample, expressed little or no interest in financial investing/planning. They typically lack the perceived discretionary funds or are too "present focused". "Indifferents" are more likely to be younger (40.0% are 18-22 years old), female (54.9%), and half as likely to be married (19.6%) versus the "Upwardly Mobile" or "Curious Bystanders". Many Indifferents feel powerless to participate in financial investing at the present time because of their limited monetary resources or lack of category comfort or interest.

Several Indifferents clearly demonstrate that ignorance and/or status quo bias are the primary obstacles blocking category involvement. Age is frequently touted as a reason for not planning among younger Indifferents who are likely to use a lifestage argument to bolster their lack of category involvement. It merits noting that an Indifferent may, in actuality, be letting another household member handle the finances such as a spouse, parent, guardian, or professional. Since many Indifferents avoid investing because of a vague phobia concerning personal finances, it is probably best to focus on key influencers or gatekeepers when appropriate.

Three Internet-Related Products/Services: A Case in Point

The charts in Figures 3-5 consistently demonstrate how usage of emerging financial products and service technologies directly corresponds to category involvement. (Charts represent market penetration on a per profile basis.)  By looking at how today's "Upwardly Mobiles", "Curious Bystanders", and "Indifferents" use emerging technologies such as automated online billing services accounts, personalized financial website accounts, and smart cellphone (i.e., Internet capable), we can gain unprecedented insight into the correlations that exist between "hi-tech" adoption and consumer relationships to the investing category.

Upwardly Mobiles are quick to see the benefits of new technologies, especially Internet-oriented offerings, and embrace them to their advantage. Members of this young adult subset are the true early adopters within this genre and may very well be leveraging "hi-tech" products or services in ways that marketers may not even be aware of.

Final Thoughts

Having specialized in young adult consulting and research for over a decade, TWENTYSOMETHING^™ INC. has watched young adults become increasingly more self-reliant in the face of increasing societal adversity and economic uncertainty. This oft misunderstood audience is savvy, highly independent, resourceful, resilient, forward-thinking, and exceptionally comfortable with new technology. (To potential detractors that might cite the "boomerang" phenomenon of recent college grads moving back home, one can easily argue that this phenomenon is a logical reaction to market dynamics and represents a highly rational response since a greater share of earned income can be allocated either to discretionary spending or investing.)

Today’s young adults represent a new breed of consumers for financial service providers and "hi-tech" companies. They are marrying later and deferring childbearing; thus, freeing up greater discretionary income for investing and new technology. This market seeks to counter any future adverse economic "surprises" by aggressively planning for the unexpected. And, lastly, there is a widespread obsession with wealth accumulation as the media still continues to portray twentysomething millionaires on prime-time. (It should be noted, however, that financial independence is more likely to be viewed as a gateway to personal freedom rather than the all-access pass to luxury goods.) Thus, the majority of traditional strategies, products, and communications associated with financial planning programs for young adults may be outdated. Such historic approaches are not necessarily relevant to today’s 18-34 year olds.

Young adult investors are driven much more by endogenous (e.g., internal) motivators such as the desire to be self-sufficient and independent. Consequently, a "call-to-action" that addresses this market’s unique needs can tap a largely missed business opportunity. Most importantly, it is critical that marketers recognize that the three demo/psychographic groups uncovered within the TECHINVE$T^™ survey suggest that the market is by no means monolithic and successful strategies must leverage the powerful themes that both connect as well as differentiate these important subsets. So, forget the erroneous "slacker" stereotype and remember that this cohort represents the world’s first truly wired generation. The implications will be profound across a variety of businesses and are already creating powerful paradigm shifts that will inevitably redefine how marketers who can successfully reach young adults will laugh "all the way to the bank".

David A. Morrison is president of TWENTYSOMETHING^™ Inc. Philadelphia-based and an industry pioneer, his firm specializes in young adult consulting and marketing research. Clients include an impressive array of Fortune 500s, leading advertising agencies, colleges and universities, global nonprofits, and state as well as federal government agencies. 

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                                                                                    © TWENTYSOMETHING^™ Inc.
                                                                                    Reprinted with Permission