Why Millennial Investors are Abandoning You

It’s time to talk about the Millennial investor, a critical market for financial services firms in the next five years. For the past decade, the media talked about the impact of Millennials in the workforce, changing purchasing behaviors, and culture shifts. What we don’t see enough of, from the customer experience strategy point of view, is how to listen to, learn from, and learn about Millennial financial services customers. And ultimately, how to meet their needs. For Millennial investors, a growing market set to inherit assets in the USD trillions in the next two decades, financial institutions must answer these questions. Right now, legacy institutions like Oppenheimer and Morgan Stanley are losing the customer experience game to more agile brands like Charles Schwab.

How Financial Services Companies Can Appeal to Millennial Investors

To combat churn, legacy financial services firms need to learn from the companies who are taking a more nimble approach to product development and customer experience design. That includes strategizing how to meet Millennial investors where they are, learn from their perspective, and provide the services they need and want. Millennials, born between 1981 and 1996, are are now making significant financial decisions. So, the time is right for banks to build customer experience strategies for them.

Often characterized by tech-savviness and values-driven decision making, Millennials increasingly comprise a significant portion of the investment market. As such, Millennial investors are poised to reshape the financial landscape. Yet, legacy banks and financial services institutions often fall short in meeting their customer experience expectations. Importantly, particularly from the financial services point of view, US Millennials are expected to inherit significant wealth in the the next few decades, due to the “Great Wealth Transfer” coming with the lapsing of the Baby Boomer generation. On average, a prospective Millennial investor in the US anticipates receiving close to $320,000 in inherited wealth. As a whole, the Great Wealth Transfer is expected to result in the passing on of more than $68 trillion USD. Much of that wealth will go to members of the Millennial generation.

Understanding Millennial Investors – Experience Preferences

This generation values personalized, transparent, technology-driven interactions. However, most legacy banks struggle with outdated systems and slow digital transformation. That creates a significant loss of customers to more agile, digital-first competitors. It is noteworthy that customers who flee traditional banks seeking greater agility and authenticity, identify these features as customer experience. And they regard the absence of digital-first agility and the personalization and ease-of-use that come with it as a customer experience failure (rather than a feature or technology failure).

In fact, a study of over 300 senior banking executives, conducted by 10X Banking and reported on by Fintech Magazine, reveals “12% of banking leaders say they have lost 30%-40% of their existing customers for failing to adopt a customer-centric approach at the front end of operations.” Once again, customer experience missteps cause churn.

Millennials demand seamless, personalized experiences and expect financial service partners to integrate their input into the decision-making processes. By comparison, legacy banks have been all too slow to adopt that kind of customer-centric approach. To remain competitive, legacy institutions must prioritize customer-centric innovations and adapt products and services to Millennial investors’ evolving needs.

Lessons from the Smartphone?

How many times do you pick up your phone daily? What do you do with it regularly? Millennials have grown up in the digital age. So smartphones are an integral part of their daily lives. They use the phone to order food. They use it to plan travel and request a car. To make last-minute next-day orders that keep their households running smoothly. To teach their kids, watch TV, and listen to music. Importantly, Millennials are also trusting their phones to track physical and mental health. Smartphones are central to daily experiences. Logically, that should include financial services experiences. A Pew Research Center report in 2022 found 93% of millennials own a smartphone, and they spend an average of 3.7 hours per day on their devices. With the pandemic, utilization of smart phones and other connected devices only increased.

Constant connectivity and its attendant ability to complete almost every required task for work, family, and personal life? on the go, at all hours, shape Millennial expectations for seamless, convenient experiences. Including banking and investing. But legacy banks fail to design products, experiences, or service interactions that accommodate the need for digital-first and asynchronous experiences.

Having lived more years with smartphones than without, Millennials expect convenience, transparency, and authenticity from service providers. These values translate to their expectations from financial services companies. They demand clear communication, easy access to information, and personalized experiences.

Segmentation is Dead

While some financial institutions like Morgan Stanley and Citibank continue to segment their customers, this approach may not resonate with millennials. The notion that “segmentation is dead” suggests the one-size-fits-all strategy is outdated. Millennials seek personalized experiences that cater to individual needs and preferences.

Morgan Stanley, for instance, segments customers into categories like Institutional Securities, Individual Investor Group, and Investment Management. This traditional segmentation approach does not do enough to appeal to emerging investor’s requirements for personalized, technology-driven interactions. As a result, Millennials are more likely to engage with financial services that offer tailored experiences that include listening to what they have to say and inviting them to participate in the process of selecting investments and building portfolios that resonate with them, their values, and their perspectives.

Similarly, another legacy financial institution, Citibank employs a segmentation strategy that targets various customer groups, including low-income earners, high-income earners, recent graduates, wage earners, etc. This approach allows Citibank to cater to a broader audience, and accounts for customers who are early in their investment journey (and a long way from delivering on their lifetime value as a Citi client). However, it is not personalized enough to resonate with the customer experience that defines Millennial expectations. Those expectations include a preference for financial services that understand their individual needs (rather than allowing their category to define their individual needs or perspectives) and offer customized solutions. Broad segments, by design do not do this.

Personalization Unlocks Lifetime Value

Growing trends towards personalization across B2B and B2C environments support the idea that “segmentation is dead” in customer experience, just as it is in marketing. Financial services institutions that fail to adapt to this shift risk losing Millennial customers to more agile, digital-first competitors. To remain competitive, legacy institutions must prioritize customer-centric innovations and embrace personalization to meet the evolving needs of their evolving investors.

By moving away from traditional segmentation and focusing on personalized experiences, financial institutions will more fully engage millennial investors, foster long-term loyalty, and ultimately benefit from the lifetime value of customers who trust them and the relationship they build with them. As such, this shift in CX approach does more than enhance customer satisfaction in the short-term. It positions institutions who are willing to commit to a CX shift as customer-centric, forward-thinking, and responsive. All customer experience wins and ROI wins for the institution.

Transparency and Inclusion: 24/7 Support and Actioning Customer Feedback?

Lack of transparency in the decision-making process is one of the common pain points for Millennial investors. Companies often make decisions based on organizational drivers that may not align with the individual investor’s needs. This misalignment creates a barrier for Millennials who value authenticity and transparency. In fact, recent research reveals Millennials prioritize transparency and clear communication in their investment experiences. They want to understand the decision-making processes and have access to relevant information.

Transparency is a cornerstone for winning Millennial investor trust. Traditional financial experiences often lack this transparency, leading to frustration and dissatisfaction among Millennials. How can an investor make decisions if her banker won’t meet with her? How can a banker offer what the investor wants if their organization doesn’t build strategy and programming that supports regular 1:1 engagement?

When a legacy bank facing this challenge hires a firm like ours, we help guide them on how to ask the right questions of the Millennial investor. Spoiler: one question is insufficient to determine an entire portfolio and the full scope of a customer relationship. Take time. Design communication that makes room for listening to and learning from your customers. This builds the trust, engagement, and loyalty that drive customer satisfaction and retention.

At the end of the day, transparency is a two way street of clear communication from the brand and creating space for the Voice of the Customer. Learn what your Millennial investor values, what they want, how they prefer? you to communicate with them, and how they want to invest.

A CX Expert’s Experience with a Legacy Financial Services Firm

When I moved my own portfolio from Oppenheimer to Charles Schwab recently, after significant research into legacy and emerging firms, it became clear that convenience and accessibility drive me and fellow Millennial investors. I need an investment experience that matches my lifestyle. That means digital-first solutions: the ability to use my phone to engage with my account at any time, from home or on the go. It means frequent touchpoints with advisors, and 24/7 access to help (not just tech support, but actual advisement). And, to a significant degree, it means collaborating with me by listening to my questions, observations, and ideas. And leveraging my areas of expertise to create a more personalized investment portfolio that gives me confidence not only in my investments but in my bank.

My recent experience highlights the frustrations of Millennial investors with expert industry knowledge and how legacy financial services firms disregard that knowledge when it doesn’t fit neatly in their models. Especially if it relates to innovation – investments that are perceived as overly risky because the finance professional might not understand, or do not know how to account for innovative industry insights or knowledge their customers bring to the table.

This speaks to a lack of transparency (and the authentic, trust-based relationship that grows from transparency). And an unwillingness to leverage investor knowledge. Despite my expertise in emerging technologies like flying cars, for example, I was unable to collaborate with my financial services firm because they did not make space for collaboration. It simply wasn’t part of their strategy or their practice. That approach will continue to cost them business as the needs and expectations of their clients continue to evolve.

Customer Listening and Collaboration Power Personalization and Ease

To better appeal to Millennial investors, financial service firms must prioritize transparency, authenticity, and personalized experiences. Understanding and addressing the unique needs and expectations of Millennials, will allow companies to build lasting relationships and secure the trust of the next generation of investors.

The legacy model of communication in financial services often adheres to the “trust me, but don’t talk to me” approach. Experts manage funds with minimal client interaction. However, this no longer resonates with new investors, particularly Millennials, who seek collaborative relationships with their financial advisors. They want to be involved in the decision-making process. To have their voices heard and expertise acknowledged. This shift necessitates a move away from traditional practices towards a more engaging, transparent, interactive service model that prioritizes meaningful client involvement.

Moreover, today’s investors expect flexibility and convenience. Legacy institutions, like Oppenheimer, operate within traditional work hours. They are slow to implement digital solutions. And they fall short of contemporary customer expectations. In contrast, firms like Charles Schwab, offer 24/7 support staffed by knowledgeable professionals and?meet demand for around-the-clock accessibility. These advisors blend technical support with genuine financial expertise, providing real-time assistance and reserving more complex queries for scheduled interactions with dedicated experts.

To attract and retain Millennial investors, financial services must co-create client management models that transcend the legacy approach, balancing the personalized experiences of platforms like Robinhood and E*TRADE with the depth and reliability of established institutions. Finding this sweet spot of co-creation and the modern service relationship is key to fostering long-term customer satisfaction and loyalty. Talk to us about how to build your modern service models.

This article originally appeared on The Petrova Experience Blog.