Millennials, adults aged 18-34, number more than 75 million in the United States in 2016. (Source: Pew Research Center.)
What Millennials expect from their financial firms is, in some cases, very different from firms’ traditional business models. In order to adapt, financial firms need to bridge that expectation gap.
As the largest demographic cohort, Millennials are reshaping the way financial services firms do business. What Millennials expect from their financial firms is, in some cases, very different from firms’ traditional business models. In order to adapt, financial firms need to bridge that expectation gap.
Key Demographic Traits
Millennials use technology differently than other groups; most are never far from their smartphones or tablets, and use apps to get data and communicate without a second thought. A 2015 Deloitte study found that over 80 percent of Millennials surveyed in 2015 owned smartphones, and more than 89 percent of them checked their devices within 15 minutes of waking up. (Source: Deloitte.)
The way Millennials use technology to communicate is vastly different from the way their parents and grandparents communicated, too. A PWC survey found that one-half of Millennials prefer electronic communications to face-to-face or telephone meetings. (Source: PWC.)
Preference for self-directed assets
More so than other demographic groups, Millennials prefer to have a handle on their own investment research and transactions. Milllennials’ perception of the financial markets is colored by their experience with the 2008 financial crisis and the subsequent market volatility; many feel they don’t need professional advisors and that they can successfully handle their own investments.
Millennials’ use of social networks on a daily basis is another factor firms must consider. Facebook, Twitter, Instagram and more form the basis for the way many Millennials interact with their friends and family members and get their news and information. Millennials are also much more comfortable turning to social networks to “crowd source” decisions, and to get opinions and commentary about financial markets.
According to Forbes, a recent survey showed that an astounding 91% of affluent Millennials would turn to social networks to read reviews and commentary from current customers about financial products and services. In comparison, just 44% of affluent Gen-Xers (those born from the early 1960s to the mid-1970s) said the same. (Source: Forbes.)
That same study found that 89% of affluent Millennials surveyed would turn to social networks for thought leadership content about financial services firms, and another 59% would use social networks for information to help them with personal finance and investment decisions.
The millennial employee demographic
Remember also that this demographic includes employees, in numbers that will continue to grow each year. Financial services firms must make efforts to understand and communicate with Millennial employees in much the same way as they approach client outreach, or risk losing talent to firms who have successfully figured out how to do just that.
Leveraging technology to stay competitive in the Millennial space
Financial firms can stay in Millennials’ good graces, and can attract new Millennial clients and employees, by being proactive about the technology tools used to communicate and manage the firm/advisor/client relationship. Beyond basic ideas like cultivating social media use, increasing website and mobile app functionality and implementing robust client portals and apps, financial firms would do well to explore the use of chat bots, EMS functionality, and tools designed to enhance and facilitate client-directed activity.
Chat bots. Most of us are familiar with the AI bot functionality available on our smartphones, (i.e. Siri or Alexa.) Successful financial services firms are joining other industries in increasing numbers to use bots to automate chatting and virtual assistant services both for client and employee communications.
Bots can be used to answer clients’ questions through text messages, social media messaging like Slack or Facebook messaging and other third-party services used by Millennials. When interacting online with a bot, users should feel like they are interacting with a live person.
While bots aren’t ready to completely replace the workforce, they can be useful in communicating with Millennial clients and employees.
Enterprise messaging functionality. Firms should consider implementing an Enterprise Messaging System (EMS), to allow for secure, seamless communication between clients and employees, allowing for messaging, chatting, file sharing between both humans and bots. Using chat bots and EMS functionality is attractive to many
Firms should consider implementing an Enterprise Messaging System (EMS), to allow for secure, seamless communication between clients and employees, allowing for messaging, chatting, file sharing between both humans and bots.
Millennials who much prefer communicating via technology to face-to-face or telephone conversations with live people.
EMS also presents an opportunity for firms to distribute “bite-sized” nuggets of news and information in a format that Millennials have embraced online already.
Support client-directed activity. For investment advisers and broker-dealers, Millennials’ preference for self-directed assets means firms need ways to help support Millennials’ need for independence by offering to provide innovative products and services. This may mean providing additional transparency into research or changing traditional views on client-directed trading platforms.
Historically, many firms have maintained that these functions need to be provided by the adviser or broker-dealer, as part of the organization’s value proposition. Working with Millennials means firms have an opportunity to redefine themselves, and identify new ways to provide value to the client relationship.
Firms that ignore the Millennial cohort do so at great potential opportunity cost. It is estimated that Millennials will inherit $41 Trillion by 2052. (Source: Planned Giving Design Center.)
At the end of the day, the financial services industry is still very much a relationship-based industry; that has not changed. However, in order to continue to be successful, and to make inroads with the Millennial generation, firms must find ways to leverage technology and social media, and to offer innovative products and services in new ways.