The millennial generation – those born between the early 1980s and mid 1990s – are now either just joining the workforce, or well into their careers. As millennials gather the responsibilities of adulthood, financial and wealth management products come with the territory – this is the essence of financial mobility. Not surprisingly the wealth industry is paying close attention to this coming generation.
Possibly the most studied segment in history, millennials have been variously labelled as narcissistic, entitled, tech-savvy and ethically conscious. Their relationship with financial institutions is well documented. The financial crisis and subsequent scandals created a general feeling of distrust toward the industry, but millennials have started to emerge as the largest client opportunity in the coming years. In order to capitalize on the opportunity, wealth and asset managers must adapt to successfully serve this complicated and fiscally important generation.
The growing millennial impact
Last year 40 percent of the global adult population were under 35 years old. Today they account for US $1.3 trillion in direct consumer spending in the US. This figure will balloon over the next decade as the millennial generation is projected to account for 75 percent of the workforce by 2025 (source: Bank of America Merrill Lynch).
Three trends will dictate how this population will acquire and use their wealth.
First, as the current 18-34-year-old cohort enter prime earning years, their liquid assets will increase substantially.
Second, these younger generations are seen to be more entrepreneurial than their parents, which should accelerate the increase of their available assets: Deloitte found that 54 percent of millennials have started, or plan to start, their own business – 27 percent are already self-employed.
And thirdly, millennials should benefit from a transfer of wealth from their parents, the baby-boomers, driving a future wave of inheritance that wealth managers need to prepare for.
So how should wealth managers adapt to serve this group successfully? Critically, you need to get a good understanding of their behaviors.
Millennials are drawn to authenticity and want this reflected in how they live, work and invest. Long-established wealth managers steeped in the traditions of stability and continuity may need to rethink their own culture and recruitment policies to connect and engage this coming generation, using a more empathetic client communication approach.
They are socially and environmentally aware, not only concerned with the state of the world, but vocal about the need for change. Which means they don’t consider profit as the sole success factor of an investment. Millennials seek out organizations and investments that prove their value with acts of social responsibility.
Nor has the impact of the global financial crisis been forgotten. This generation was greatly affected and as a result is more cautious and conservative than baby boomers.
This was also the first generation to grow up in a digital platform world, acknowledging technological innovation as a constant. They adopt early. They try out new services. They value utility. They resent friction.
Their financial habits are like everything for them, always online first – it is their default setting.
For millennials, technology is the key differentiator that wealth managers must be aware of. Deloitte found that 57 percent would change banks for a better technology platform solution. There is no reason to think wealth managers are not under the same scrutiny to offer client portal and client reporting advancements.
Financial advisory adaptations
Based on these different behaviors, it is fair to assume millennials are not being satisfied. But the opportunity to do so clearly exists, and for wealth managers who react it will be greatly rewarding. To combat distrust, financial advisors need to focus on pricing transparency and become more communicative and open, ideally with new choices of alternative investments, markets and products.
Most importantly, wealth managers need to better engage millennials digitally. The InvestCloud Digital Experience involves clients, provides an intuitive experience and is highly personalized, supporting many varied personas in order to work for each individual. Opportunities abound for wealth managers to advance the millennial client experience – not to mention to make advisor portal and other internal tools better for the management of this crucial client demographic. Now is the time to act.
To find out more about how we can help you digitally engage millennials, request a demo through our website at www.investcloud.com/Demo or call us at +1 (888) 800-0188.
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