Three (more) ways to help meet the financial needs of Millennials
Millennials now make up the largest segment of the US workforce and are driving new demands on the financial industry. Although Baby Boomers still control 70% of disposable income in the US, Millennials stand to inherit $30 trillion from their predecessors. What is defined as the “great transfer of wealth” has begun.
Millennials have been described financially as overly optimistic spenders, placing priority on lifestyle over planning. While many debunk these generalizations, it’s not who Millennials are but what they need that has often been misunderstood. Millennials have different financial needs than the generations prior.
In June we shared three ways to help meet these different financial needs by:
- Boosting their financial literacy
- Personalizing products and service recommendations based on historic financial usage
- Framing the future and they will start to plan for it
Building on this, here are three additional ways to help meet the financial needs of Millennials:
Provide opportunities for engagement
According to the National Endowment for Financial Education (NEFE), 45% of Millennials own their own home, 60% have a retirement account, and 28% have financial investments. However, nearly all feel they have too much debt and are uncomfortable with their financial situation; 34% have two or more sources of outstanding long-term debt and 25% have overdrawn their checking account within the last 12 months.
The NEFE specifically points out the gap between “the financial responsibilities assigned to young adults and the knowledge and capacity needed to manage those responsibilities effectively.” In short, Millenials lack financial literacy.
However, what Millenials lack in financial literacy, they make up for with dedication. Despite a lack of training in how to deal with complex financial decisions, they are highly engaged in their finances and own a variety of assets. Millennials are unprepared to handle sudden economic shocks and, despite early investment in their future such as retirement, emergency funds are rare. As one of the most educated generations, another source of their debt, Millennials are aware of this challenge and are seeking opportunities to proactively change their position.
Financial institutions can respond by offering opportunities and outlets for Millennials to engage in educationally focused dialogues. From formal seminars and webinars to targeted online content and education programs, to in branch meetings, networking, and mentorship, Millennial are seeking out information, support, and guidance.
Millennials also have higher expectations. They not only are seeking out engagement with their financial institutions but are seeking community engagement with purpose. According to a Deloitte’s Millennial Survey, Millennials believe that a focus on improving society should be among the most important things businesses should seek to achieve. And they walk the talk. Millennials themselves are charitable with 63% donating to charities, and 43% actively volunteering with a community organization.
Use technology to communicate
Millennials are digital natives. As Richard Stein states “They are not merely comfortable with technology. They assume technology.” This has significant implications on their communication preferences. Not only do Millenials love communicating via their smartphones, but this full-time access to technology at their fingertips has also opened up endless opportunities and options for financial institutions to engage with them in real time.
For financial institutions, this brings new challenges. First in finding the right balance between traditional face-to-face and digital communication. Millennials value personalization and being able to develop a “relationship” with their financial institution. Going digital doesn’t mean standardization. While communicating new offers can (and may be preferred) digitally, you can use the opportunity to offer optional face-to-face interactions. While the uptake may be low, the option will be well received.
Look for opportunities to have customized updates based on customer preferences and behaviour. To take it one step further automate these customized updates to come directly from advisors your clients know. This small attention to detail makes a significant difference in engagement. According to Experian, personalized promotional mailings have 29% higher unique open rates and 41% higher unique click rates.
The second challenge is in selecting the appropriate, productive communication solutions. The key to this is strategy. Simply communicating via social, web, e-mail and offering mobile-based apps and tools is not sufficient. It’s the combination and how well they coherently work together to serve your needs that are important.
Understand and meet expectations
With the increase of new communication tools comes increased expectations around security. According to a recent survey by The Clearing House, nearly all (99%) of financial app users are at least somewhat concerned about data privacy. There is an exception for financial institution to safeguard their clients’ personal information, from email to date of birth, to account numbers and passwords. We summarize more of the Clearing House’s findings here.
Millennials also have different expectations of financial advisors. The execution of financial transactions that satisfied their parents is not enough. Millennials expect their advisors to help them truly understand why they are pursuing a specific financial strategy.
There is a stereotype that millennials expect perks ranging from ping pong tables, to free snacks to massages. However, research shows that it’s high-tech perks that are at the top of the wish list. 63% of those aged 18 to 34 list things like the internet of things, augmented and virtual reality, and AI-assisted technology as the biggest motivators. It is not sufficient to make your financial institution experience ‘cool’, rather it needs to offer a technological advantage.
A delicate balance exists when customizing your financial institutions’ programs to meet the needs of Millenials. While change and adaptation are mandatory, you cannot lose sight of the needs of the Baby Boomers and your current customers, nor miss the forward-looking opportunity with Gen Z. Most importantly, you must not let your focus across generations water down the impact of your programs to a point that they are no longer effective with any generation. Offering flexible and customizable options within your high-quality products, innovative technology focused solutions, and engaging communications is the most effective way to avoid this trap.
What challenges have you faced in meeting the different financial needs of Millennials? Share with us by getting in touch with us at firstname.lastname@example.org.