In 2017, an Australian millionaire called out his generation for spending money on avocado toast and lattes instead of building wealth and purchasing homes. This remark sparked a furor and reignited discourse about millennials — namely, who they are, how they spend their money, and why so few of them are achieving the financial success of their parents.
In wealth management, many firms and advisors are strategizing to understand how to reach this market, align with their preferences, and utilize technology to stay relevant in the face of ongoing fintech disruption.
As millennials reach middle-age, the conversation has shifted from viewing this generation as entitled teenagers to recognizing them as a powerful economic force. Here’s what wealth management firms need to understand about this demographic, including their unique challenges and opportunities.
Understanding the Millennial Wealth Gap
All generations have had their ups and downs, but Millennials — particularly those born before 1990 — had a particularly rough start out of college. Large student debt bills were compounded by one of the worst job markets in decades due to the Great Recession. This lackluster start has left Millennials behind in amassing wealth, buying homes, and making other advances afforded to the generations before them.
Despite making up the majority of the workforce, Millennials only hold 4.6% of US wealth. Data indicates that Millennials earn 20% less than Baby Boomers did at the same age.
However, there are indications that Millennials are gaining ground. Since 2016, Millennials have grown their wealth by over 80% thanks to more interest in investments and healthy stock market gains.
Factor in Baby Boomers transferring nearly $68 trillion in wealth to their children in the next 20 years and the opportunity for Wealth Management firms to work with this demographic starts to present itself.
Millennials and Technology in Wealth Management
Millennials and Gen Z are perceived as vastly preferring technology over a human connection, but the truth is more complicated. In the 2019 Edelman Millennials and the Future of Money Report, Millennial and GenZ respondents said that interacting with human advisors was less intimidating (54%) and easier to use (58%) when compared to roboadvisors or AI. And, when it comes to trust, Millennials trust financial services firms over tech companies 62% to 38% to create and deliver advice.
At the same time, Millennials prefer and expect a deeper level of personalization than older generations. This type of personalization can only be achieved at scale through technology. According to Accenture’s Millennials and Money: Next Era Wealth Management report, these digital elements are critical in their wealth management mix:
Computer-generated (robo) recommendations
- Self-directed investment portal with advisor access and mobile access
- Gamification to educate them on investing and keep them engaged with their portfolio
- Software that tracks transactions, payments, and real-time financial data
- A platform that incorporates social media and sentiment indices
Combining these digital elements with a human touch is the key to providing a balanced, personalized experience.
Aligning Your Approach with Millennial Preferences
Customization and personalization are key to reaching Millennials and younger generations. They want a frictionless experience that allows them to customize the look and feel of their apps and portals. They also expect their advisors to know key information about them and their preferences, so when they go to an advisor for advice, they have everything they need to make an informed decision.
Millennials are natural researchers and want to know more about investing and expect advisors to help them navigate their different options. Offering information that they can self-service allows them to get up to speed and then integrate expert advice into their process. Making it easy to reach an advisor digitally whether through chat, video, or email allows them to get the expert guidance they need quickly and build loyalty and trust in the process.
As Millennials continue to amass wealth, firms can no longer afford to ignore digital offerings. Combining the features and personalization of technology with a human touch will put wealth management firms at an advantage as they tap into this new and rapidly growing demographic.
