The Disruption Generation
It’s widely recognized that millennials, those born between 1980 and 2000, have grown into a difficult economy to navigate. Currently the largest living segment of the United States population, millennials are anomalies compared to their earlier generations - millennials are waiting longer to get married, have kids, settle down in their own home, and make the leap on big purchases, like televisions and cars. These decisions are largely, if not entirely, based on financial concerns and the economic disruption during which millennials matured. Additionally, the demand for cars, and even office space, has been offset with the spread of “sharing economies” (think WeWork, Uber, and others), and so purchasing many of these “big-ticket” items becomes a lower priority.
Although millennials are not generally considered financially savvy, the Schwab Modern Wealth Index reports that 40% of millennials have a financial plan and an additional 36% of millennials have their plans in writing, comparable to the number of Generation X and Baby Boomers with financial plans. Plus, 72% of Millennials who have a written financial plan received assistance from a financial professional, about 5% higher than the national average.
A Desire to Make Good Decisions
This demonstrates that most millennials want to make smart financial decisions and are willing to spend the money to receive the help they need. Furthermore, Forbes estimates that millennials are actually saving 36% more than their elders and putting aside more than 20% of their annual income. However, these savings are not going into their retirement funds; Schwab estimates that only 38% of millennials have a work-sponsored retirement account, and that only 18%, half the percentage of Baby Boomers, have a retirement account outside of work.
According to the Bank of New York Mellon, these discrepancies are linked to millennials’ fundamental lack of understanding of how big a task they face in preparing for retirement. More than 75% of millennials want financial services providers to be brutally honest about their financial futures if they fail to build an adequate retirement income.
When communicating with millennials about their retirement plans, financial services providers should make a concerted effort to speak in a way that millennials will understand. By using language millennials comprehend, financial services providers can help millennials develop a higher financial efficacy and reassure millennials that their plans are tailored to their paths, not the generations that came before them.
Recognizing the differences in millennials’ priorities is an important step financial services providers must take to effectively bring in this generation. For example, 63% of millennials would save more if their pensions account allowed multiple withdrawals throughout their lifetime. In response, financial service providers should consider developing retirement savings products that give access for life events like babies, buying homes, and unexpected life events.
Financial Education is Key
To attract and retain millennial clientele, financial service providers should promote financial education throughout schools and universities to promote financial efficacy earlier. Currently, 46% of millennials receive no information on financial matters through their workplace or school. If college students and young professionals are made aware of the considerable steps needed to attain a comfortable retirement, they will come to financial service providers earlier in their career.
Furthermore, financial service providers should engage with finance and fin-tech start-ups to develop their social investment credentials, something that has a very strong appeal to millennials who do not feel that adequate impact oriented investment options are available. Research shows that millennials feel pension funds and insurers provide limited options for investing in social finance products. According to the Bank of New York Mellon, millennials would allocate an average of 42% of their portfolio to social finance products if the option was available. Most millennials would select a provider with Social Finance credentials over the one without, but feel that providers are blocking their access to Social Finance products. This is an opportunity for financial services to partner with fully-fledged Social Financial organizations to create more SRI opportunities.
Finally, it is imperative that financial service providers emphasize the bleak future that awaits millennials who fail to properly prepare for their retirement. Right now, 51% of millennials reported calculating their retirement needs on “a blind guess.” Another 39% made an educated guess, with only 10% of millennials actually calculating what their retirement needs will be.
Ultimately, the key to attracting millennial clientele comes down to communicating why they need your financial service assistance, and the different paths you can guide them on towards financial security. If you’re looking for the best marketing strategy to communicate with millennials, get in touch with us today so we can help you develop a strategy to attract and retain millennials as clientele.