At last week’s NextGen Wealth Management conference organized by Financial Research Associates, industry experts and thought leaders gathered to discuss one of the biggest challenges facing wealth management firms today. That challenge is understanding the distinctly different preferences and expectations of millennials, and determining how to change their marketing approaches to align with this enormous group of prospective clients.
Who are these millennials? While definitions vary, millennials are generally defined as people born from 1982 through 2004, which makes them between 11 and 34 years old today. With over 101 million people in this group, millennials are the single largest generation in U.S. history, and it shows in the workplace. According to the Pew Research Center, millennials in 2015 surpassed Gen Xers as the largest group in the U.S. labor force, with more than one in three workers, or 53.5 million, in this category.
By any definition, millennials comprise an enormous group of people whose impact on the economic, political, and social fabric of the country will only increase as time goes on. That’s why it’s imperative for wealth management to start changing their approaches and doing more to build relationships with millennials on their terms – and to do so sooner rather than later.
On that central topic, one of the conference’s most compelling presentations was given by Dan Coates, president and co-founder of YPulse, a market research and consulting firm that’s a leading authority on millennials. YPulse provides clients across a range of industries with strategic insights on youth attitudes and culture. Mr. Coates’ session centered on the attributes of millennials, and in particular, on their information gathering and decision-making processes. He also shared his knowledge of the marketing trends, messages, and techniques that are resonating with millennials, and how wealth management firms could adopt some of these approaches.
What Makes Millennials Tick
For background, Mr. Coates began with an assessment of millennials though the lens of generational theory. That’s the premise that the era in which a person is born affects the development of their view of the world. Factors that create big impressions on generations include the prevailing parenting styles, childhood events, and formative events, those that occur as children come of age.
For millennials, their childhood era occurred during a long economic boom. As a result, they grew up as the treasured and sheltered offspring of prosperous parents. That contributed to them becoming team-oriented, confident optimists. They are also pressured (by ‘helicopter parents’ and ‘tiger moms’), achieving and highly productive, and more conventional (with their family relationships) than their Gen X predecessors.
However, millennials’ childhood and coming-of-age years were also marked by major crises, including the 9/11 terror attacks, the Columbine shootings, Hurricane Katrina and others. Millennials also had a front row seat for the financial crisis of ‘08/’09, the Great Recession, and many Wall Street scandals. As a result, from a financial and investment perspective, millennials are highly risk-averse, and many of them hold negative opinions of financial services firms.
One other major distinguishing characteristic of millennials is their use of technology. YPulse’s research on this mirrors innumerable other studies – and simple observation – that tells us that millennials are digital natives. They’ve grown up around computers, the internet, mobile phones, and video games. As Mr. Coates put it, “For millennials today, their mobile phones are their absolute heartbeat. And with those devices, word of mouth has become millennials’ number one purchase decision criteria.”
That’s the basic profile of the 100 million plus millennials who will be inheriting trillions of dollars in assets from their parents over the next 15 or 20 years. The challenge for the wealth management industry is that as it stands today, most firms are woefully unprepared to attract, communicate naturally with, win over, and retain this huge group of prospective clients.
Adapting for the Millennial Client
The good news is that the industry and individual firms have time to make the changes that are needed. But it is clearly time for wealth management firms to stop trying to keep up with change and start driving change themselves.
As for specific solutions, Mr. Coates’ presentation offered no magic bullets that firms can use to overcome their challenges with millennials. He did, however, share some marketing strategies and tactics that innovative firms in financial services and other industries are using to connect with and start building the relationships that are so important with this younger crowd. Those marketing approaches include:
Focus on them, not you.
Make an emotional connection.
Set the context, tell a story.
Make it a game.
The millennial generation is clearly different from their Gen X and Baby Boomer predecessors. They think, consume information, interact and make decisions in ways that are not the same as wealth management firms’ existing clients do. And millennials aren’t going to change who they are and how they operate. That means if wealth managers want to grow their business with millennial clients, they’ll need to adapt to them, not vice versa. Innovative firms are already moving in this direction, and others would be smart to follow their lead.