Study Finds Millennials Overconfident About Investment Knowledge

Despite being overly confident about their investment knowledge, 94% of Millennials expressed a desire to learn more about investments, according to a new study.

Research by global asset manager Schroders shows that Millennials around the globe are overly confident about their investment knowledge. Phase two of the firm’s annual Global Investor Study defines this group as investors aged between the ages of 18 and 35.   

The study found that although 83% of American Millennials said they knew more about investments than the average investor, only 28% could correctly identify what an investment management company does. Globally, the figures were 61% and 32%, respectively.  

Still, despite this optimism, the study also found that Millennials are eager to improve their knowledge of finances, with about 94% reporting that they would like to learn more about investments. When it comes to acquiring this information, 51% of Millennials said they would consult a financial adviser the next time they make an investment decision, while 46% of them said they would conduct their own research using independent websites, the study found.

However, the research also suggested that overconfidence in investment expertise tends to be prevalent across numerous age groups. Globally, the research found that 51% of investors surveyed were overconfident about their investment knowledge and only 37% could accurately identify what an asset management firm does. Forty-five percent of those who were considered overconfident were aged 36 or older.

“The study found that investors tend to be overconfident in their own understanding of investments,” says Sheila Nicoll, head of public policy at Schroders. “This combined with other findings, that investors are unrealistic about the income that they can expect from their investments, means they risk missing their future financial targets.”

According to Schroders’ research, investors on average expect a 9.1% annual return on their investments.

The desire for knowledge, however, also resonated with multiple age groups. Eighty-nine percent of all respondents said they would like to learn more about investments. Eighty-five percent of those were aged 36 or older, the survey found.

Respondents also expressed interest in acquiring this information across numerous channels, with 43% preferring to speak with a financial adviser, and 42% opting for research using independent websites. The other top choices were free company events (37%), guides and tutorials (36%), and online videos (34%).

Schroders notes that the desire to seek investment advice from a financial adviser is seen across numerous regions, with 58% of respondents in the Americas preferring this option, 46% in Asia, 48% in Europe and 50% throughout the rest of the world.

Fifty percent of global investors say they plan to consult a financial adviser the next time they make an investment decision, the survey found.

“The fact that consumers are increasingly being expected to take responsibility for their future financial wellbeing, creates an ever more pressing need for them to be engaged and better informed,” Nicoll says. “We are committed to helping make investment communications more straightforward. Encouragingly, investors want to learn more. Investors of all ages are looking to financial advisers and online sources to improve their knowledge. In most cases we would recommend getting professional advice.”

More findings from the 2016 Global Investor Study by Schroders can be found online here.