You’re 29 years old, working long hours in a full-time sales position with a side hustle of freelance work every evening. You’re currently supporting your 10-month-old daughter and sending regular financial contributions to your parents. You’re also trying to save for retirement, childcare and your child’s future education, whilst paying off student loans and your house. And you need to pay for medical aid each month plus the usual household expenses. Every day is a struggle. And then you come face-to-face with myriad headlines telling you that as a millennial, you’re doing money all wrong.
A quick poll of any 22-37-year-olds around you will make it clear that most millennials worry about money constantly. They earn less than the previous generation did at the same age, and change jobs frequently so run the risk of not preserving. It’s well documented that they’re heading for a perfect storm. So why isn’t the financial services sector talking to them in a way they can relate to?
André Wentzel, Solutions Manager at Sanlam Personal Finance says, “All too often, the premise has been that young people will come to the financial services industry to ‘fix’ their finances, like generations before. This has meant that the industry has not focussed on evolving its offering to be more accessible to an upcoming generation of new clients. Currently, there’s an alarming mismatch: Millenials tend to be somewhat sceptical of what financial institutions can offer. Question is: are financial institutions doing enough to better understand millennials, even though they may not yet have accumulated sufficient assets to be priority customers?
If financial institutions don’t start speaking to millennials now, millennials’ mistrust in them will only grow. This has significant ramifications for the industry, which loses out on a massive client pool that’s predicted to hold five times as much wealth by 2030.”
Here, Wentzel discusses some of the ways that financial institutions can better connect with Gen Y:
Make sure millennials know what they’re paying for: To speak to an extremely cost-sensitive generation, all financial services need to be as competitive and transparent as possible, with a clear value proposition. People need to know what they’re paying for, especially given the misconceptions and preference for ‘DIY’ outlined below:
a) Gen Y has high confidence in its abilities despite low levels of financial education and literacy. Which means many millennials adopt a DIY approach to money matters, turning to online advice and products.
b) Gen Y often perceives financial advice as just for the wealthy. What’s the point of paying for advice when you don’t have many assets?
Understand what they’re up against: The majority of millennials are debt-saddled job jugglers in ‘asset catch-up mode’ with significant family responsibilities. Which makes it hard for them to commit to long-term goals like retirement. For advice to be valuable, it needs to be relevant. It needs to guide millennials to make the smartest possible trade-offs with a holistic, big-picture view of their finances in mind.
Incorporate mobile to enhance experience: GFK South Africa reports that 3.2-million smartphones were sold in SA in the first three months of 2018, equating to 12.4% growth in device sales this year, compared to the first quarter of 2017.
Millennials already use mobile to speed up processes like banking and transacting. And to source financial advice. The scalability of technology enables an improved, customised experience. However, research shows that clients often still require some human interaction, which means that companies who can marry both requirements will do well.
For example, shows that millennials are more open to robo-advice (digital advice from automated investment services), but they’re also starting to suffer from ‘.’ With so many robo-advisers online, millennials are struggling to know which to trust. This means there’s an opportunity for trusted financial institutions to provide robo-advice that’s backed by human interactions with professionals.
Offer advice at the right time: By March, all retirement funds will be required to offer retirement benefits counselling for individuals changing jobs. This means there’s an opportunity to proactively speak to millennials during a time of big transitions and decisions that have long-term consequences.
Leverage off millennials’ desire for development: Millennials actively seek self-development opportunities. They’ll engage with financial literacy programmes provided that these are ‘snackable’, smart insights that empower them to evaluate what’s in their best interests.
Consider the slashers: The financial industry will need to offer products that are flexible enough for a generation of job-jugglers and savvy slashers, especially as this becomes the norm rather than a trend as the Fourth Industrial Revolution is ushered in. Currently, product provision is mostly via an employer so this is potentially a huge change as traditional format employment arrangements become less relevant.
Pick the right channel: Providers will need to adopt an omni-channel approach that optimises all channels of communication at their disposal to reach millennials via their preferred mediums. Find out if your millennial client prefers WhatsApp to email, for example.