November 11, 2020 7 min read
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They have been called the most unfortunate generation in history . As much as it may seem like an exaggeration, it’s safe to say that everyone knows exactly which generation is being described. The average millennial has experienced slower economic growth since entering the workforce than any other generation in history , and 62 percent of millennials live fortnight to fortnight. On top of that, they earn 20 percent less than baby boomers at the same stage of life. Many millennials failed to make money during the long recovery after the Great Recession. Instead, they were forced to use their savings for retirement, rely on high-interest loans, and rack up student debt even as the world economy grew and the stock market hit record highs.
How can you improve your luck in these difficult times? One of the most effective ways to build wealth is by investing. And beyond new investment tools that make it easier for young people to participate in capital markets, a whole new investment framework is in the works, one that uses blockchain technology to create a new class of digital assets.
Financial professionals have taken up the challenge of engaging this generational cohort, but wealth managers must step up their game to win the hearts of millennials. So far, the focus has been on easy-to-use digital apps and automation – a decent start for the Netflix- loving bunch. Having grown up in the shadow of big tech, nearly half of millennials are open to using alternatives to traditional investment means, such as Google’s investment options, according to Accenture .
What are these exotic tools that millennials use?
The leading example of financial tool disruption is Robinhood , the stock trading and investing app that took the market by storm and quickly amassed tens of millions of users. With such apps available to make stock trading more 21st century friendly, millennials working from home during COVID-induced lockdowns traded to such an extent that experts hypothesized that they were actually moving the market .
It’s easy to see why high-tech, commission-free brokerages should appeal to a bankrupt, digital-savvy generation – they want a piece of the pie. For this to work, they will need more than just easy-to-use apps.
A more democratic form of investment
The solutions mentioned so far simply take the existing framework of capital markets and add a digital layer on top. Recently, however, an entirely new asset class was born in an inherently more democratic framework.
INX Limited recently launched the first SEC-registered initial public offering of security tokens, paving the way for a fully regulated cryptocurrency and digital asset exchange in the United States and giving retail investors a piece of the tokenized pie. Until now, digital assets (essentially assets placed on the blockchain) were only available to institutional investors within the United States, despite the fact that overseas retail investors could also access them.
So what’s in it for millennials? For one thing, when assets are placed on the blockchain, they can be traded 24 hours a day, 7 days a week. In today’s stock market, our money is locked between 4pm Friday to 9:30 am Monday. But what if something dramatic happens over the weekend that totally disrupts the market? What happens when a pandemic totally reshapes the world? In the latter case, Black Thursday devastated investors around the world earlier this year, as stocks plummeted dramatically when national closings were announced globally.
Weekends are not immune to drastic market changes. However, on a digital asset and cryptocurrency exchange, investors are not locked in on Saturday and Sunday because all investors who trade on such an exchange have access to their own assets throughout the day. The tokenized investment framework holds great promise for millennials in particular, who are fed up with being pressured by legacy institutions.
How can millennials improve their luck in these difficult times? The answer: finance technology / Image: Depositphotos.com
Another advantage lies in the technology itself. The tokenization process allows literally anything from cars to paintings to real estate to be turned into tradable assets that can be divided into shares. Millennials who wish to participate in real estate investments but do not have the money to do so will be able to invest in a portion of the property, divided into “security tokens”, which will generate potential profits for them in the future.
And different companies in the digital asset space are tackling different aspects of finance. Realio, for example, is building an ecosystem that aims to make institutional-level investments accessible to a wider audience. Last month, the company partnered with Valentus Capital Management to digitize an investment fund worth more than $ 250 million , opening up moderate-size investors to opportunities reserved for the big players in traditional financial markets.
When a generation has encountered recurring economic turmoil, they only have their wits and ingenuity to achieve the kind of financial stability that previous generations could more easily take advantage of. Beyond that, it’s about time the world of finance adapted to the 21st century, and through more than the standard digitization of easy-to-use processes and applications. Only time will tell if tokenization will move the financial needle far enough, but it is a welcome start.