Millennials, the time is now…

Now is the time millennials are starting to come into their own in terms of investment, entrepreneurship and wealth management. Today, millennials are the largest generation of adults (finally outstripping Baby Boomers according to recent analysis), and they’re turning the world of finance and wealth management upside down.

The consumer is now in charge, dictating how, when and why they want to receive advice and conduct business. The millennial generation (between 25 and 34), are starting to move into their prime earning decades. Many are also inheriting substantial wealth, and many more are increasingly seeing entrepreneurship as the fastest and most direct route to accumulating wealth.

What does this mean for wealth management firms?

Put simply, they’ll lose out if they don’t work out ways to engage with millennials in the way this new generation wants. According to a report from Boston Consulting Group, talking with millennials in the appropriate way while using the best platform, is the only way they’ll win in the new client landscape.

The report also points out that millennials are in charge of around 10 per cent of the world’s private wealth. And, as they’re gathering more at an approximate rate of 16 per cent every year, they will most likely account for 16 per cent by 2020.

“Many wealth managers don’t seem to have a clear idea of what kind of service models, products and approach they should use with millennials,” explains Phillip Nunn. “To thrive in this new financial environment, we all have to work out ways to retain clients, as well as attract new ones.”

Around 75 per cent of those millennials surveyed who had already switched banks and advisors, said that they were mostly dissatisfied with the customer service — a clear indication that there is much work to be done.

What makes millennials different?

The main differential between the investment habits and plans of previous generations and those of millennials is that the latter want to be in charge. They need to be in the driving seat of their decisions, as they have a low level of trust in advisors.

This is borne out by Merrill Lynch’s report by its Private Banking and Investment Group. The report, called Millennials and Money, shows that a whopping 70 per cent of the high net worth individuals (HNWIs) that were surveyed consider themselves ‘self-directed’. They said that they just don’t believe that advisors have their best interests at heart, and therefore prefer to take matters into their own hands.

Adds Phillip: “Wealth managers and financial advisors are going to need to be more transparent with pricing, as well as needing to move quickly into digital and mobile channels if they haven’t already. We’re already seeing changes from banks and wealth management firms in terms of upgrading their services and employ specialist millennial advisors within their client services team.”

Transparent communication is key

Citibank Bhd, for example, has made changes when it comes to transparency surrounding prices and products. Over the past ten years, they have shifted their product disclosures up front so that clients only sign up when they fully understand the pricing structure and the risks. This subtle shift is something that appeals much more to millennials than traditional product offerings.

Fees have also been reducing for a few years, and it’s likely this will continue. The financial world is going to have to be much cheaper to access as online competition continues to bring prices down. By 2030, some experts predict that fees could be half of today’s prices, which should encourage millennials to trust these advisors and be willing to buy products and services.

Differing client expectations

Millennials are tech-savvy in a way no generation has been before. They also have far more information at their fingertips and they’re willing to do the research themselves from various sources.

Obviously, this has a knock-on effect as they wonder what they’re paying for when it comes to enlisting outside advice. If they can find it by themselves, then they’re far less likely to pay high fees. However, the answer is for wealth management firms and banks to adapt to these changing needs and tailor their advice through various channels.

Advances in product offerings

An example of the new breed of online wealth management advisory companies is Wealth Horizon. This low-cost service is specifically targeting those who aren’t willing to pay the high costs of traditional financial advisors. The online advisory platform offers advice on investment for as little as ￡12.50.

These new services are eliminating everything making this industry unpopular with millennials. This includes high fees, charges people aren’t expecting and lack of clarity about how investments are doing.

While robo-advisors are increasingly popular, and seem to be trusted to a level by millennials, there’s an argument for a half-way house between no human interaction at all and some face to face contact.

“It’s possible that millennials haven’t yet realised just how much we’ve evolved to match their needs,” says Phillip. “It’s crucial that we continue to listen to young investors so that we can fully understand what they need. It’s about giving them the correct information so that they can make informed decisions.

“It’s a new wealth management world, and in order to continue to be successful, we need to understand that this new breed of clients doesn’t need us in the same way as generations that have gone before. We need these clients, and it’s our duty to work hard to work out what they want from us, and for us to accommodate it.“