Boomers to Zoomers: Passing a hand grenade to Gen Z?

By Paul Nixon, Head of Behavioural Finance at Momentum Investments

If you’ve been “ghosted” or took some time out for a “glow up” to work on your spirituality, chances are you were born near the turn of the century. You’re part of Generation Z or a “Zoomer”. Zoomers, have faced challenging formative years that have undoubtedly shaped their attitudes and outlook. Understanding Zoomers will be key for financial services providers who will compete for their wealth as they enter the economy, but also as they inherit wealth from Boomers and Gen Xers.

Five distinct characteristics arguably define Gen Z¹:

1. Contrary to popular belief, they are financially-minded. Zoomers have witnessed their parents getting hit hard in the pocket by the Global Financial Crisis of 2008. And after over a decade of sluggish economic recovery, again by the COVID pandemic. Zoomers value security, but not the same way their parents did. They have less trust in politicians and the financial system and their investment habits show this clearly. For example, Zoomers are more likely to buy cryptocurrency than stocks, according to a YPulse survey conducted earlier this year.²

• From “digital pioneers” to “digital natives”. Zoomers were born into a world of social media and ubiquitous information. Technology and a connection to the internet is everywhere. Financial services providers will need a slick digital offering as a “ticket to the game” and this is no longer a differentiator. Furthermore 38% have indicated an interest in buying non-fungible tokens (NFTs).³

• They are the loneliest generation yet. Pockets of Zoomers clustered together each staring at a screen defines the “alone together” social interaction. This is not to isolate, however, but to include friendships from around the globe and to bring these people into a group conversation. But the mental health challenges that come from more time watching Netflix and the increasing pressures of social media cannot be ignored.

• They are shrewd consumers. Zoomers aren’t watching ads or listening to celebrity endorsements. In fact, they are nearly 50% more likely to take financial advice from social media (2021).⁴ They are also more likely to take some time before making a decision and value real-life experiences from people they trust.

• Living in and for the now. Although politically progressive and concerned about the future, they tend to live in the now. A 2020 NerdWallet survey revealed that 72% of Zoomers have yet to start saving towards retirement.⁵ Zoomers are more interested in investments that provide shorter term security and are available should the need arise.

Research conducted recently by the Momentum Investments’ Research Hive into the trading behaviour of Zoomers largely confirmed some of the trends mentioned. With Momentum Investments, investing is personal and understanding Zoomers to help them invest more in their future is important to us.

Our own 2022 research shows that Zoomers comprise a fraction of the execution-only trading accounts (approximately 5%) and are also surprisingly loss-averse given their youthful disposition.

Zoomers were 1.73 times more likely to trade in a winning position (realise gains) in 2020. This worsened to 2.42 times in 2021 as uncertainty amidst the pandemic heightened.

This is known as the “disposition effect”, where realising a loss (trading in a losing position) is painful and so the trader avoids it.

The behaviour is therefore that the trader becomes overly likely to trade in a winning position as they become regret-averse (fearful of the winning position reversing). This is a useful insight in engaging with Zoomers to assist them in managing their behaviour.

The predominant emotion that Zoomers associate with their finances is anxiety.⁵ The greatest challenge for this generation may just be fighting their impulses and falling prey to their biases (like the disposition effect). Getting the basics right like budgeting and rigorously using the 50/20/30 rule of budgeting (notably the 20% savings portion in the middle) will assist in reducing the anxiety experienced around finances. However, financial services providers will need to help Zoomers by providing investment vehicles that matter to them wrapped up in a slick digital experience that are referred to them by people that matter.

1. https://www.aecf.org/blog/what-are-the-core-characteristics-of-generation-z
2. https://www.ypulse.com/article/2022/04/11/heres-how-many-gen-z-millennials-have-bought-crypto-nfts/#:~:text=While%20Gen%20Z%20is%20less,%25)%20than%20stocks%20(15%25)
3. https://www.ypulse.com/report/2022/04/07/buying-into-crypto-and-nfts-trend-report/
4. https://goknit.com/the-3-forces-driving-gen-zs-financial-behaviors
5. https://www.nerdwallet.com/blog/generation-z-money-survey/

Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406).