Baby Boomers have begun transferring an estimated $30 trillion of wealth to their millennial children or heirs, and this handover offers financial firms and their advisors the opportunity to serve this younger generation, already the nation’s largest. But to reach them, the financial industry must grasp that millennials grew up in a different world than their parents and even GenXers and they hold very different investment behaviors.
Financial advisors risk turning these millennials off if they fail to realize that this generation demands that their professional experiences reflect how they live their daily lives. And their lives revolve around consumer technology that, in its various channels, define practically everything they do.
If wealth firms want these “digital natives” to look to them for counsel, advisors must start speaking their language to earn their trust. They must personalize their experience, tailor their investment information and communications and offer collaboration tools. Among other things, they must understand that millennials favor social responsibility, are attracted to brand, will search for true value and will “click to buy” to act decisively.
The rewards are huge
The stakes are enormous because millennials – an estimated 83.1 million Americans born between 1981-1999 – are game changers. The technology they embrace goes way beyond a few smartphone apps and increasingly encompasses virtual reality, artificial intelligence, blockchain and real-time analytics that will only grow in impact.
They know more about investing than other generations. A survey by Broadridge Financial Solutions, which services the financial industry, and Roubini ThoughtLab, a thought-leadership consultancy, finds that millennials possess a better grasp of their financial goals, risks and costs and are more open to alternative investment options and ways to access them.
Nearly three in five say they won’t invest in something they don’t understand, and 78 percent intend to communicate face to face with an investment provider, although many millennials don’t think their providers are prepared to meet their expectations.
There’s no time to waste
For those and other reasons, wealth firms must move immediately to attract them and forego waiting to reach them until they accumulate more wealth. Why? Because 72 percent of them are inclined to switch providers if their expectations are unmet. At the same time, three in four believe working with a customer service advisory team will be important to them over the next five years and 39 percent even say they would pay extra for it.
How can wealth providers develop a “millennial-proof” strategy? It involves a fundamental shift in focus for firms that tend to be tradition-bound. They must revamp key aspects of their operations – from advisory approaches and product portfolios to business models, technology use and marketing plans.
They must rethink technology because to this digital generation, everything occurs in real time. These five major actions can help wealth firms and their advisors generate that millennial-proof strategy:
• The Future Foundation: Ensure that your firm’s systems pull together content and data from internal and external sources and perform the strategic analytics necessary to serve customers and market to prospects. This project can require more than a year.
• Make it Personal: Leverage data and analytics to tailor all marketing and customer relationship efforts to to each millennial and his or her specific tastes and interests. This lets advisors hit every touchpoint, including content and messaging relevant to the customer’s life and financial situation.
• Technology, Technology, Technology: Build the most innovative technology platform available for every aspect of the business with analytics serving as its foundation. The technology should apply to social, mobile and cloud platforms as well as 24/7 customer portals. Embrace such innovations as virtual reality, artificial intelligence and blockchain. Partner with a fintech firm to keep up with tech breakthroughs and offer the services millennials favor. Advisors should master when to use technology and when to deploy the human touch.
• Be Omni-channel: Rapidly changing communication channels make it critical to employ technology that gives advisors flexibility and nimbleness to offer millennials the latest features, functionality and the best overall client experience – anytime, anywhere and via any device. But besides technology, demonstrate that their trusted financial advisory team will be there over the years to provide guidance and advice for them and their families.
• Go “Bionic”: Recognize that robo-advisors are increasingly popular in providing personal financial advisory services. As Broadridge CEO Rich Daly notes, these computer programs that use algorithms to create smart, diversified investment plans are easy to use and inexpensive. But, he emphasizes that good financial counsel depends on elements that robots can overlook such as intellectual capital and an understanding of nuance. He favors a hybrid or “bionic” approach: part robot, part human. Also, add millennials to your advisory teams because these younger counselors can relate more naturally to them and reach out to millennial heirs of client families.
The Broadridge-Roubini ThoughtLab survey offers wealth planners the seven digitally enabled investment tools that at least one-third of surveyed millennials most expect to use over the next five years. They include low-cost online trading platforms; technology-enabled financial planning; customized products and investment services, portfolio risk-management tools and stress testing; improved analytics for tracking performance against goals; automated trading and rebalancing; and access anytime, anywhere on any device.
Looking to the future of personal investment, we must recognize that to reach millennials, a hybrid robo- and human-based system is advisable. Plus, there’s no time to waste. Act immediately to learn the language of these digital natives to attract them and earn their trust. They are the heirs to massive wealth and represent a pathway to the future for the financial advisory industry.
Traci Mabrey is head of wealth solutions at Broadridge Financial Solutions.
