Financial literacy is an indispensable skill for today's youth, empowering them to make informed and effective decisions about their financial resources.
The advent of financial technology in particular, has significantly transformed the financial education landscape, introducing innovative tools for learning and managing finances.
These technological tools streamline processes, supporting the development of a more financially aware and empowered generation.
Generational perspectives
There is a hugely skewed take-up of FinTech towards the younger demographics versus the older.
For example, in the wealth space, the most significant transfer of financial assets globally in the history of human beings is happening over the next two decades as baby boomers pass over to Gen Z and millennials.
So, many more younger people will have wealth and need advisory services, which should be accompanied by a significant shift from human to digital advisers.
Currently, the most effective model for financial institutions in the wealth space is hybrid, which allows them to target all demographics.
They must focus on providing the benefits of artificial intelligence-powered services rather than just human advisory if they wish to keep up with the market and youth demands. Otherwise, they are likely to see clients leaving.
Financial challenges and solutions often differ significantly between generations. While older generations may value traditional banking and personal consultations, the youth lean towards digital, quick access and peer advice.
Ensuring solutions cater to both demographics involves understanding their unique needs and preferences – younger users might prefer mobile-first, gamified experiences, whereas older users may prioritise security and simplicity.
Bridging this gap requires offering tools and educational resources that respect these differences while promoting essential financial skills across generations.
FinTech firms design various apps and platforms to simulate economic scenarios, making learning interactive and engaging.
For example, virtual stock trading apps allow users to practise investing without risk, while budgeting apps provide real-time insights into spending and saving habits.
Other tools focus on demystifying complex financial concepts through user-friendly interfaces and simplified language, making it easier for young people to grasp and apply these ideas in their financial journey.
While FinTech provides numerous opportunities for enhancing financial literacy, challenges like information overload and the reliability of sources can be overwhelming.
Young individuals should be encouraged to evaluate the information and tools they use critically. Seeking guidance from trusted financial advisers or educational programmes can provide a foundation for understanding, alongside using FinTech tools for practical application.
Three steps to boost financial literacy
Engage with interactive learning tools: Utilise FinTech apps that offer gamified learning experiences, such as simulated trading platforms, budgeting apps or financial planning tools. These interactive elements make learning about finance more engaging and less intimidating.
Regularly consume financial content: Read blogs, watch videos, or listen to podcasts that discuss financial topics. Many FinTech companies and financial advisers produce content tailored to young audiences, breaking complex issues into digestible pieces.
Practise financial management: Apply the learnt concepts by managing a small budget, investing a minor amount, or tracking spending through FinTech tools. Real-life application cements learning and builds confidence in managing finances.
Financial literacy is an essential skill in the modern world.
As FinTech continues to evolve, it will undoubtedly play a crucial role in shaping financially savvy future generations equipped to navigate the complexities of the digital financial landscape.
Nicholas Wright is head of institutional sales at Saxo Bank
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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