Millennials are the most conservative investors since the Great Depression

They’re fond of smashed avo breakfasts and renting for life but Millennials are also displaying an investment attitude so conservative it hasn’t been seen for five generations, says a US super expert.

Chicago-based Sabrina Bailey, the global head of retirement solutions for Northern Trust Asset Management, says the under-40s, born between 1982 and 2002, prefer keeping their cash in safe, low-yielding investments rather than taking a riskier growth option in their super savings.

“We’re seeing Millennials with the same conservative outlook as those born in the Great Depression, with 80 per cent preferring capital conservation over growth assets,” she says.

“There’s a lack of trust with government and financial institutions. Millennials saw the tech downturn in the early 2000s and the GFC and the impact to their parents. That’s causing the conservativeness.”

She pointed to a 2014 UBS report that revealed Millennials held almost twice as much cash as any other generation in their investment portfolios with sentiment the same in 2016 thanks to volatile markets coupled with low returns, which provided little incentive to look long term.

One rationale has been that Millennials enter the workforce with higher education debt and don’t have money to invest but once they do accumulate saving they’re cautious about where to invest.

This could hinder their retirement nest eggs as higher-risk strategies taken earlier in the savings journey tend to yield higher balances at retirement.

Ms Bailey’s view coincides with Deloitte Global’s 2017 Millennial Survey, of 8000 under-40s across 30 countries, which revealed young professionals are less likely to leave the security of their jobs, more concerned about uncertainty arising from conflict.

Those in developed countries were not not optimistic about their future prospects nor the directions their countries are going.

It could be argued that wariness of the financial advice industry is warranted with a recent Australian Securities and Investments Commission review warning that up to 75 per cent of advisers act outside their clients’ interests when recommending in-house products.

One-in-10 investors were said to be in a “significantly worse financial position” after following the advice in the review, which focused on products CBA, Westpac, ANZ, NAB and AMP recommend.

The generation is widely known to be disengaged with traditional investment channels and wary of fees, which has fuelled a number of smaller Australian super funds targeted at the age group from Atlassian founder Mike Cannon Brookes-backed Spaceship Grow, Mobi and Human Super and Zuper.

But CMC Markets chief strategist Michael McCarthy argues the conservative Millennial runs counter to his experience of younger Australian investors who had more exposure to share trading at their age than previous generations and had adopted disruptive new platforms to gain access to equities such as fractional investors Robin Hood and Acorn.

“This is the generation that has been the most prominent in trading cryptocurrencies. It doesn’t get any more high-risk than that,” he said.

But he said the scars from the GFC were still very evident, which may be influencing Millennials’ long-term attitudes.