What makes each generation unique? From the slang we use to the choices we make, the nature and significance of intergenerational differences has been subject to tireless debate. But as Millennials emerge as the world’s biggest spenders, one crucial difference – their relationship with money – is having a global impact.
For wealth managers, understanding this relationship is key to unlocking a new crop of budding investors. Millennials don’t just want to have more money: they want to find out what this money can help them achieve.
The largest consumer population aren’t investing
Investing can help those who may not have a strong financial security work towards building one for themselves.
That’s why you’ll be hard pressed to find that Millenials, who are currently the biggest spenders globally, aren’t investing enough for their future.
Insight into Millennial financial behaviour
To better provide financial aid to the world’s largest consumer demographic, service providers would do well to understand their needs and goals.
1. Millennials rely on word-of-mouth
Millennials grew up as social media boomed, and connecting with peers has become a driving force in their buying decisions. A global market research study found 82% of Millennials rely on word-of-mouth, social media and mobile influences to make purchases, compared to 52% of Boomers. In contrast, just 19% of Millennials claim to be influenced by what they see in print media.
If attracting Millennials to invest is your goal, reaching them where they are most found is a first pivotal step.
2. Environmentally conscious
Beyond good products, Millennials prefer brands that commit to the society they serve. In other words, they are more socially aware and conscious of the companies they choose to support. With 81% preferring brands to make public their commitment to good corporate citizenship, investment firms need to do more than just delivering their core services.
Millennials express their beliefs for causes through their purchasing power. These potential investors are more willing to invest in a company if their money is being channelled to providing more jobs in communities or reducing their carbon footprint.
3. Millennials demand digital automation
Millenials are the most digitally savvy investor group with a preference for technology-based interactions over human interaction.
They are actually open to learning more about investing, but expect financial services to incorporate the most cutting edge technology to make investing as simple and seamless as possible. Being able to check trends and data on the go and seek advice in just a few taps appeals to them, which traditional modes of investing are unable to provide for.
4. Common concerns with investing
Many Millennials understand the urgency and pragmatism into putting your money into places that will grow your wealth; however, the term “investing” has long been an elusive buzzword to many outside the financial sphere.
To the financially uninitiated, investing can seem intimidating and complex. The unwillingness to take risks is underpinned by the lack of and inefficient access to knowledge and advice.
Making investment the norm after saving
Merely saving for the future and having a retirement fund may not be enough of a financial safety net. Factoring inflation rates and possible economic downturns, Millennials who are not actively growing their money may be at high risk of financial insolvency much sooner than later.
This is why it is imperative that financial services do more to make investing an essential practice as saving.
How financial providers can achieve this
1. Reframe the perception of investing
Firstly, service providers need to quell common misconceptions that investments are complex and inaccessible.
Many Millennials believe that a certain degree of wealth or expert knowledge is required before they can start their investment journey and this is simply not true.
It’s a tough journey ahead, but service providers have to prioritize educating and advocating financial literacy to the public. By incorporating digital tutorials and targeted educational content in their customer service models, service providers can make the idea of investing digestible to this customer segment.
The aim is to transition their belief to seeing investment as not only important and essential, but also available to the everyday person. Providing Millennials with an intuitive, affordable digital platform gives providers the chance to shift perceptions and begin associating investing with their customers’ lifestyle, making it as accessible as a streaming subscription or gym membership.
2. Offer tailored hybrid solutions
Millennials may have a penchant for technology-based interactions but they also have a deep need for self-governance. They are more willing to explore new investment strategies and digital advisory platforms as long as they are personalized and offer a sense of “self-investing”.
This makes them the ideal demographic for personalized robo-advisory solutions, which are digital investment portfolios driven by algorithms to assist investors in making the right decisions with little to no human intervention. This is why two of three investors who opt for robo-advisory are Millennials.
However, despite their preference for a digital-based platform, Millennials still require the human touch and advice a human advisor can offer. As Millennials age, life events become increasingly complex: whether it’s marriage, a new business, or more financial commitments, the investing scenario becomes more nuanced.
This is where a hybrid solution comes to play: combining the speed, low cost and mobility of robo-advisory together with the experience of a seasoned wealth advisor should provide them with the best of both worlds.
Advisors ignore the new generation at their peril
Advisors who understand the needs and goals of Millennials and are able to adapt early to tailor to their personal preferences will be positioned to onboard a large share of this market segment. As emerging investors, this new generation offers exponential value to service providers and represents a new crop of potential lifelong customers. A proactive response to their needs could help advisors establish their client base for years to come, while those who fail to adapt their service offering may find themselves left behind.