An astonishing amount of time and money is being spent on researching and understanding the habits and needs of what has become America’s enigmatic consumer segment: Millennials. It seems every month brings another vital report or article espousing an absolutely correct theory on the behavioral and financial characteristics of the much-discussed generation. Heck, even business managers are willing to spend thousands on millennial workplace consultants. So, what do Millennials expect from businesses? How will they spend and invest their money as they age? Do they even have any money? Almost no one has the answer, yet pretty much everyone does.
Beyond the obsession and speculation, some revealing demographic data exists, and it should both excite wealth management firms over the market potential and awaken them to the reality that the functionality and feel of their industry is approaching an inflection point.
There’s a New Workhorse in Town…
A recent Pew Research Center report shows that Millennials took the top spot for largest generational labor segment in 2015 (ages 18-34). During that year Millennials eclipsed Baby Boomers by supplying 34 percent of the U.S. workforce, with the latter group providing 29 percent. This former share is forecast to grow over the near term, as more individuals start careers and a large segment of America’s immigrant population falls within the millennial age bracket.
Moreover, Millennials are predicted to soon surpass Baby Boomers as the largest living generation overall. And if one takes into account that the younger generation is seen as one already full of HENRYs (High Earner, Not Rich Yet), it isn’t hard to imagine the potential for record-breaking income growth and attainment. With such a strong trajectory, the millennial segment of the market is primed for an introduction to wealth management, but firms that don’t effectively and comprehensively engage this age group could risk alienating them.
…That Actually Saves for Retirement…
While the YOLO (you only live once) spending habits of Millennials have been well documented, and sometimes criticized, it is also worth noting that despite the fact they are starting to save for retirement later in life, those that do are contributing more to their 401(k)s than Baby Boomers, averaging 8% of their income. Thus, regardless of how often they eat out, Millennials have the ability to dedicate a healthy portion of their salary towards retirement and the awareness to do so.
Yet how that money is leveraged to actually boost one’s economic standing both in the present and future is probably where Millennials and previous generations exhibit the greatest differences. A recent Capital One Investing report cited that “11 percent of millennials say growing their retirement nest egg is their top goal” in 2016, with travel and weight loss ranking higher. Older generations, especially Baby Boomers, tend to take a more active role in the management of their retirement savings. An easy, if perhaps presumptive, explanation for this gap is that Millennials are still young and, in terms of their realistic priorities, probably shouldn’t care too much about retirement accounts at the moment.
…But Is Skeptical of Financial Services
However, dig deeper into that Capital One Investing report and one will find some incredibly illustrative statistics alongside an insightful summation from the firm’s president, Yvette Butler:
“The current environment is tough for many investors, with market volatility, uncertainty about the economy, and other ongoing challenges and concerns continuing to impede confidence and willingness to invest for the future.”
If numbers paint a clearer picture, consider that 86 percent of Millennials believe it is harder for them to save for retirement than it was for their grandparents. Furthermore, 60 percent believe they lack the knowledge and experience necessary to invest wisely. Combine these sentiments with the broader notion that 58 percent of all investors distrust the financial markets and industry in general, and one can conclude that Millennials are nearing a point of disenfranchisement.
Though there is still hope.
While the responsibility of bridging this gap rests upon the same group set to benefit from a successful undertaking—wealth management firms—externally developed technological solutions are helping advisors make this connection. Creating engaging, educational content, and delivering a personalized omni-channel investment experience will go a long way towards establishing a meaningful, long-term relationship with Millennials, helping America’s largest working generation become the largest investing one too.