While the Millennials still dominate our headlines and attention, we cannot let our definition of the “Next Gen” end there. Generation Z is our country’s most powerful cohort developing right behind the Millennials, and the oldest turned 20 in 2016. Generation Z is 75 million strong and it is imperative that we pay attention to the people they are growing into.

If the Millennials were considered Digital Natives, Generation Z was literally born with a device in their hand. Their personal heroes are “YouTubers.” Generation Z is the first generation for which video games are a spectator sport. Amazon’s purchase of Twitch for $970 million validates this trend and preference. Most of us have a difficult time getting our heads around why watching other people play video games would have any appeal—never mind trying to understand the implications of a generation that does. But Twitch, founded in 2011, is now the fourth-largest source of U.S. Internet traffic, behind Netflix, Google, and Apple.¹

The popularity of YouTubers, SnapChat, and Periscope can give us some insight into preferences of this generation. Previous generations experienced the world in a very limited way, mostly through carefully curated content from a limited number of news outlets. Gen Z is knocking down walls and borders and disrupting not only how and where the world will consume content, but what kind of content is valued. Their choice today is a highly unedited and very personal content that in many ways mirrors the connection with the borderless world they desire.

There are no limits for the connections Gen Z creates, and few barriers. A colleague of ours shared that his daughter’s school assigned an online scavenger hunt. We remarked how previous generations would have pulled a team together with the local kids from school and the neighborhood. Compare this to his daughter, who, within three days, had built a virtual team that included students from schools in Asia, Europe, and South America to set out on her mission. Supporting this point, a recent study showed 50 percent of international 8- to 12-year-olds are online daily and 25 percent are engaging with peers in other countries every day.²

This generation is not only limitless in how it evaluates physical barriers. Generation Z also feels limitless in their sense of what’s possible:

• Achieving influencer and celebrity status used to involve a significant amount of talent, hard work, and luck. For Gen Z, it’s within the reach of anyone with a webcam. Where big brands struggle to develop content that creates followers, Gen Z influencers, or YouTubers, find it easy to connect with millions of followers from their basement.
• Redefining relationship. For Generation Z, virtual and augmented reality offers a tremendous ability to disrupt how this generation connects and engages. Coupled with social media, augmented reality will change everything for how individuals meet, interact, and build relationships. It will also change the ways brands connect with consumers. The promise of these technologies is to bring technology into our world. You won’t read a newspaper or search for information; it will all come to you and be a part of our natural environments. It’s too soon to tell what these products will be or what industries will come from them, but we suggest taking a look at the vision of companies like Magic Leap (www.magicleap.com) to get a sense of how differently learning, working, and interacting will be in the not-too-distant future.

Generation Z is just beginning to experience the moments that will inform the lenses they see the world through, but early indications point to this generation becoming one of the most independent thinking and creative we have ever seen. While it may seem contradictory, this generation is one of the most realistic, too (no surprise, considering their Gen X parents). Here are some points to keep in mind as you consider Gen Z.

• The Millennial generation may be the last one to be raised with the American Dream in mind. Unlike their Millennial cohort, Generation Z was not taught to unabashedly follow their bliss. Rather, Gen X, largely the parents of Generation Z, their own skepticism notwithstanding, has witnessed the Great Recession, more war, and global unsettledness. As a result, Gen Z has been raised to be and think practical.³
• Born pinching, zooming, and swiping, Generation Z’s ease of technology, along with their creativity, is creating an unprecedented generation of want-to-be entrepreneurs. A recent study shows 72 percent of high school students want to start a business someday compared to 64 percent of college students. Sixty-one percent of high school students want to be an entrepreneur rather than an employee compared to 43 percent of college students. Children in grades 5 through 12 respond similarly with 42.1 percent stating plans to start their own business. Almost 50 percent of the schools surveyed now offer classes in how to start and run a business, and almost 40 percent believe they will invent something that changes the world.⁴
• Generation Z’s creativity is buoyed by the technology revolution around them. There is no adopting of technology—it’s a ubiquitous part of their lives. Cultural influencers on YouTube and SnapChat inspire them to try their hand at creating original content, use 3D printers at home to bring their ideas to life, and they’re smack in the burgeoning Internet of Things world. Couple this with the promise and excitement of augmented and virtual reality, the availability and accessibility of drones, robots, and coding classes—it’s no wonder Gen Z is dubbed the Maker Generation.⁵

Generation Smarts: Working with Gen Z Clients

Generation Z is already showing the world their propensity and talent to create. They represent 20 percent of the population of the United States.⁶ Gen Z, not the Millennials, are poised to be our country’s most diverse generation. They are the children of the 400 percent increase in multiracial marriages within the last 30 years and among them, Hispanic teenagers are the fastest-growing demographic in the United States.⁷

Their creativity, size, and coming of age at a time of soaring innovation are small hints of the way that Gen Z will change the world. We need to pay attention and engage with them now.

• From a financial perspective, Generation Z faces similar concerns as Millennials. Generation Z faces high un- or underemployment, high student loan debt, and the high pressure of knowing that their financial security will depend largely on their independent efforts (not existing social systems).
• The sharing economy, so popular with Millennials, may be challenged by Gen Z. For example, Generation Z demonstrates a very high desire for home ownership. A recent study shows more than half of teens offered to give up social media for a year and do double the homework if it guaranteed home ownership in their future.⁸
• While they are among our youngest clients and prospects, Gen X thinks about and is engaged in their financial health. A recent study showed their top financial concerns are affording college (39 percent) and having a large student loan balance (39 percent). This concern may have been inherited from their parents, as 58 percent of Gen Z parents surveyed said they borrowed money to pay for college and 43 percent are still paying them back. Perhaps in an effort to spare their children a similar burden, the same study showed that more than half (51 percent) of those parents have arranged a 529 College Savings Plan.⁹
• Developing and offering financial literacy programs to this population will be critical, and it is our obligation. Generation Z developed poor financial habits early. More than half the respondents in a recent survey carried a credit card balance for six months or longer (only 23 percent pay it off each month). Most do not have checking or savings accounts. In addition to your efforts to educate, like the Millennials before them, engaging their parents is a solid strategy. Those Gen Zers who demonstrated good budgeting skills was on account of regular and informative discussions with their parents about saving money (67 percent), compared to those who aren’t good budgeters (34 percent).¹⁰

Paying attention to the changing demographics around us informs so much about our political and economic futures. It is critical to understand these trends from an investing and client-relationship-building perspective. As we wrote this chapter and flowed through the demographics, we have no doubt how difficult it is to run a business keeping five generations (and soon more) in mind. But there are firms that even conceptually are understanding the shifts taking place and adapting their businesses accordingly. Like William Gibson famously said, “The future is already here—it’s just not evenly distributed.” The most thoughtful and successful investment firms will always have an eye on the future and be looking to build client experiences with the flavor of that future into their processes as a matter of course—not just keeping up.