Wealth management firms consider attracting millennials with social enterprise
The Wealth Management Association held a forum in London this week to brainstorm ways of ensuring they have clients in the future. Wealth management firms think that establishing a social enterprise might be the way to get millennials to manage their financial future.
Wealth management firms don’t just deal with the mass affluent. As one of our colleagues did recently at Pioneers Post, anyone can seek advice from them about any kind of financial instrument, from stocks and shares to simply getting a pension. At the forum, four teams explored the reasons why millennials weren’t engaging and offered solutions to get them on board.
Why millennials aren't interested
The average age of clients of wealth management firms is currently 65. This isn’t so much of a surprise; it takes time to get on the housing ladder, pay for your family and hopefully experience salary rises as you progress through life.
But baby boomers are the generation that have profited from rises in house prices that their grandchildren can now ill afford. Saving for a deposit and then paying for a mortgage consumes a large part of the income of millennials – people who reached young adulthood around the year 2000.
That’s if they can save for a house in the first place; the point was made that students leaving universities in 2006 were doing so with an average of £15000 in debt whilst having to contend with paying ever higher rent.
It was also pointed out that the world was a very different place for millennials than for existing clients wealth management advisors have now. These people would be very unlikely to ever have the good fortune of a final salary pension.
Millennials want easy access, low effort experiences.
Then there was the question of trust. Research by the four teams participating in the forum concluded that many millennials were wary of any financial services, which they blamed for the financial crisis.
They also disliked being transparently sold to. If they were curious about wealth management, asked Richard Stone of The Share Centre: “Why wouldn’t they just follow Martyn Lewis?”
The reply came from one of the millennials in attendance – Kitty McCormick of Coutts: “Because millennials know that everything on there is paid for.”
The research concluded that millennials want easy access, low effort experiences. It wasn’t long before the poster boy for this sort of business got a mention. Should the wealth management profession try and Uberfy itself and if so, how?
The time taken to explain risks and investment options also came under scrutiny: it was suggested that this took an average of six hours. But, the question was asked, which person working a 9-5 has got six hours these days? Could the answer be more flexible conversations via Skype?
There was some reticence about this: “I don’t know how much I’d want to be paid for working on a Saturday morning,” said Jonathan Manning, senior investment director at Investec wealth & investment, who didn’t look keen at the prospect.
How to get millennials on board
One solution for getting millennials to engage with the wealth management industry was delivered passionately by Stephanie Gopalakrisna, head of marketing and communications EMEA at Pershing. She suggested establishing an online tool, describing it as a social enterprise to provide education about wealth management: “It will provide free, unbiased information and that will address the lack of trust.”
There would be no banner advertising. Arguing that the wealth management industry had to start talking the language of the millennials first, she advised her audience: “Let’s try and educate this generation before we try and sell anything to them.”
Gopalakrisna is a millennial herself. She urged her audience of wealth management firms not to compete for the attention of millennials at this stage but to first work together: “Maybe then they will be willing to engage, maybe then we can think about proposition, we can think about product.”
There seemed to be general agreement that the wealth management sector is behind the curve with technology and not engaging with the world in the same way millennials did, via smartphones and tablets.
A 25-year-old needs to save £800 a month to retire on £30,000 a year
Apart from potentially opening up a market to sell to, there is a serious social argument for better education about finances. How will a generation not willing to think of long term financial provision for themselves due to present day financial demands pay for themselves in old age?
The Chartered Institute for Securities and Investments reckons that a 25 year old needs to save £800 a month to retire on £30,000 a year. Notwithstanding how many people of that age have that kind of disposable income, as one of the teams pointed out, a weekend at a festival costs on average £568 and what’s more fun?
The incentive to get millennials to use the proposed online tool would be to give them a snapshot of their current finances and what that might mean for their future.
Estimating that a millennial might have changed jobs several times before the age of 30 and have corresponding pensions from each, the online tool would instantly illustrate how much money was in each pot alongside debts, savings and anything else. It would also draw a picture of what income could be expected in later life.
Should it ever come into existence, such an online tool could mean the end of rooting around in drawers at home for financial statements that were never looked at in the first place.
It could also mean that a generation with more information at its fingertips than any previously will also become the most financially astute during their ever lengthening lifespans.
Photo credit: Will van Wingerden/Unsplash