On the face of it, the millennial generation may not appear to offer much to your business as potential clients. However engaging with the next generation of investors could prove to be an important factor in ensuring your future prosperity - and conversely leaving this engagement too long, could mean that you’re too late.
For good reasons, most financial adviser firms since RDR and the advent of pensions freedoms have focused on serving the needs of people approaching and following retirement: typically the demographic with the most capital to invest.
Where business revenue is a factor of assets under management, millennials can be easy to discount. They are early in their careers, unlikely to have much capital to invest and face challenges such as student debt and an inability to get on the housing ladder.
So why should financial advisers make efforts to engage with this segment now rather than waiting until they reach a later stage in life? This is much less about the assets under management they could bring to the business in the short term than about assets under management which could be lost. Column inches have been written about ‘The great wealth transfer’ but perhaps we should rename it ‘The great wealth retention’; research indicates that 65% of inheritors will not use their parents’ financial adviser on receiving an inheritance. This shift of assets away from the business is potentially a direct hit on the bottom line particularly for advisers maximising assets in advance of a potential exit strategy.
However, there is plenty of evidence to suggest that many young people are far more engaged with financial matters than we might think. For example, on the video sharing social network TikTok, the hashtag ‘Investing’ has accumulated more than one billion views. What constitutes ‘investing’ on TikTok and many other online forums however is another matter, with much of the content focusing on get rich quick opportunities through cryptocurrencies and other, often unregulated, activities carrying a very high level of risk. Who wouldn’t be seduced by the opportunity to ‘earn a million’ in days from the comfort of your home when your friends are all doing it?
The reality, is that many young people are very interested in making the most of whatever money they have got, but just not in a traditional way. They are actively seeking out and being pushed online content and engaging in instant messaging and group chats with friends. As a result, when they do make their first foray into investing, this often involves purchasing Bitcoin or other crypto assets online.
But should we worry? I would argue that by the time this generation inherits wealth, not only are they not engaged with their parents’ financial advisers, but an online or hybrid adviser is ‘waiting in the wings’ to assist.76% of millennials want advice when they inherit wealth so perhaps earlier engagement is vital?
So if they are to be clients of your business, how can you build effective links with this generation? Perhaps the key is to engage, educate and adapt?
Engage: This could simply mean putting your brand in front of them. A call asking if they need a quick chat about their finances as they leave home for university. Do they need help with a mortgage? Have they started their first job and need to understand the employer sponsored pension?
It’s not necessarily about generating profit from them at this stage but future-proofing the business and making a connection.
Educate (and be educated): Bitcoin and crypto might not be included in your investment proposition but are we able to have conversations about it? Can you then relate this to volatility and diversification to engage the next generation and keep your advice business on their radar.
Financial advisers are also indicating that conversations about sustainable investing are definitely assisting with early engagement. The use of white labelled apps to help young people track their finances is another effective engagement tool.
Maybe we can also use ‘TikTok’ language; the beauty of a pension contribution, tax relief and an employer matching payment is an example of ‘how to double your money!’
Adapt: Don’t assume that this generation doesn’t have any money or couldn’t benefit from your services. Many have already inherited from grandparents and research show that by mid-late 30s they have a focus on saving for family and pensions. A different proposition may be required in your business where charges, products, investment strategies need to be reviewed. We are now seeing great examples of advisers implementing this.
In summary, I’m not suggesting that we all need TikTok accounts but perhaps the recent news that the FCA are now at the TikTok party is definitely an interesting move!
Click here to download a copy of our intergenerational wealth guide. To find out how Schroders can support you, visit our website, contact your usual Schroders’ representative or call our Business Development Desk on 0207 658 3894.
 Centre for Economics and Business Research (CEBR)
 The generation game, Sanlam UK, 2018
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