This post is by Saker Nusseibeh, chief executive officer of Hermes Fund Managers. It is the foreword to Green Alliance’s new report The future savings challenge, produced in association with Hermes.
In the debate about the future of the financial system and the reforms needed to ensure that it is better positioned to serve its proper purpose in society, what is often forgotten is that the investment industry is merely an agent for ordinary savers, who are often excluded from the discussion by the ‘professionals’ and the academics. Such exclusion reflects the disassociation of the ultimate asset owners from the actions undertaken by their agents, which in many ways has contributed to the dysfunctionality of the industry.
Generation Y has a vested interest in the outcomes
This disassociation is especially pertinent when it comes to the views of the young. By definition, they have a vested interest in the longer term outcomes of the decisions we are making in the allocation of capital on their behalf today. Moreover, our decisions regarding the way we structure our economy in terms of sustainability and the environment will have a greater impact on their quality of life than on ours.
Green Alliance’s report is therefore important in that it is the first serious attempt, to my knowledge, to reach out to the younger generation through focus groups and try to assess their views around their savings and, more importantly, their ability to influence the investment ecosystem of the future through their actions.
The young don’t trust financial insitutions
In some ways, the findings of the report are not surprising. There is, in that segment of society as in all others, a well deserved sense of distrust when it comes to financial institutions. There is also an understandable focus on short term needs, as this generation seeks to establish its independence following higher education.
However, in some regards, the results are not what the investment industry, or environmental activists, would expect. There seems to be either a lack of awareness among that generation of their power to influence the future shape of the economy with regards to environmental issues collectively, or a reluctance to do so, unless it is seen as part of a societal move. For the asset managers who hope to engage with this generation as potential customers, especially as we move towards a defined contribution model, there is a clear indication that the communication methods used by the industry are neither effective, nor trusted.
For me personally, this study is a welcome reminder that there is much work still to be done on two fronts. First, it is necessary to directly engage with young investors and encourage them to understand and use their collective ability to shape the future allocation of capital by their agents. Second, for those of us who are committed to a more environmentally sustainable future, to advocate to that segment of society that they should consider this more urgently.
