The pandemic has impacted our behavior in a lot of unexpected ways — including how, and why, we invest. In addition to purchasing more cryptocurrency, a study by economic research firm ThoughtLab revealed a number of emerging "megatrends" in the investment space, including a shift toward environmental and social justice investing.
"In our many years of conducting wealth management research, these investor shifts are the most dramatic seen," said ThoughtLab CEO Lou Celi. "Investor shifts that would have taken years to play out are happening in months."
Shifts toward purpose-driven investing occurring across all generations
ThoughtLab's survey provides overwhelming evidence that purposeful investing is of growing importance to investors. People are increasingly interested in environmental, social and governance (ESG) funds, and it's not just young investors:
- 27% of advisors said that clients of all ages and wealth levels are interested in ESG investing
- 32% of baby boomers and 22% of millennials plan to invest in ESG funds over the next two years
- 61% of billionaires planning ESG investment, versus 34% of average investors
- 34% of investors consider social purpose when selecting firms
The report, which surveyed 2,325 individual investors and 500 investment providers across 15 countries, indicates that with ESG investments, investors are also willing to lose out on gains if necessary. Over a third of advisors said they believed that their clients are willing to accept lower returns for investments that align with their goals.
According to ThoughtLab, respondents also expect their actual investment firms to align with their values. As well as social purpose, other key criteria for evaluating wealth management relationships include:
- Ethical business practices (48%)
- Vision and integrity (41%)
- Approach to inclusion (39%)
- Treatment of employees (31%)
Other notable trends
Beyond a commitment to social values, the survey also identified other key trends in the space, including:
- Continued shift to digital offerings: The pandemic has put a greater emphasis on the importance of digital offerings, with 9 out of 10 respondents saying they prefer mobile options.
- More investment options and services: Going forward, there’s an increased interest in nontraditional investments, like IPOs and commodities. In addition, over the next two years, 58% of investors will also want personal financial planning, while 53% will want with day-to-day financial management services.
- Greater transparency around fees and advisor compensation: Only 37% of investors noted being happy with provider’s fees; 36% said the same about fee structures.
- A willingness to change firms if necessary: A third of respondents moved 20% or more of their funds over the last year to firms offering products and services they prioritized — plus, an additional 44% said they’re planning to do so over the next two years.
Methodology: In July and August 2021, ThoughtLab surveyed 2,325 investors and 500 wealth management firms in 15 countries. The firms surveyed include investment advisory groups, private banks and trust companies, broker-dealers, robo-advisors, family offices, and retail, institutional, and alternative asset management firms. This study was sponsored by a coalition that included Deloitte, eToro, FIS, Salesforce, Appway, HCL, LexisNexis Risk Solutions, Publicis Sapient, Refinitiv, Recordsure and TCC Group.