Experts give us their views on what the financial services industry can be doing to engage with the millennial generation.
Millennials are growing ever more influential and affluent. This group now comprises the largest cohort of workers, while mutual insurer Royal London estimates that millennials are set to eventually inherit up to £400bn. Taking these factors into account, it’s not surprising that financial institutions are turning their attention to this age group.
Unfortunately, all the signs so far are that millennials are suspicious of traditional institutions. Banks and others have done themselves no favours – and, in the great financial crisis of 2008, trust in banks and financial advice firms crumbled.
But despite steps to improve the image of financial services – root and branch changes like the RDR and MiFID II for instance have helped garner a more professional perception – it’s still struggling to excite millennials. Traditional financial institutions now face stiff competition from fintechs and other startups who are using technology to make the experience much better for those starting on the route to financial independence.
Why is engagement and saving among millennials low?
Part of it comes down to the environment this age group has grown up in. As multi-award winning financial journalist Georgie Frost explains:
“The financial landscape is very different for millennials to that of their parents’ and grandparents’ generations. Gone are the days of free higher education (in England and Wales), jobs for life, gold-plated pensions and being on first name terms with your bank manager.”
According to Frost, this makes some existing financial services solutions irrelevant. “Companies need to think outside the box if they really want to engage with millennials more effectively,” she believes.
Another thing holding this generation back, according to Kristian Feldborg, Co-founder of digital home insurance broker Policy Castle, is debt, which is preventing them from saving.
“A lot of young people leave university with a large student loan and face significant living costs, so it’s not easy to save,” he says.
He also feels that poor levels of financial literacy are to blame: “Couple debt with a lack of financial education generally and a consumer culture that very much promotes a spend now, pay later attitude and it is understandable that savings rates are pretty low.”
So what can financial institutions do to close these gaps?
Be open and transparent
As a personal finance blogger focusing on debt management, Josh Haste of Money Life Wax, thinks many financial services companies could do a better job with transparency.
“[Those who don’t work in financial services] don’t understand the subtle nuances of finance and need support in all facets,” he says. “Just understanding how interest on a student loan works can be very daunting and confusing. Firms that are transparent and informative could have a leg up on their competition!”
Speak millennials’ language
Frost believes the amount of “unnecessary jargon and legalese” is not only “a complete turn-off” but could have far-reaching negative consequences for millennials and providers alike. “[Millennials] will either not engage at all or not engage effectively, meaning they may end up buying products and services that aren’t best suited to them or are ineffective. That can foster negative feelings and cynicism towards those companies,” she says.
Get the right technology in place
Millennials like being able to interact with providers on the go and this means investing in apps and other technology platforms can bring real benefits to providers.
“To engage millennials, we need to start looking at things from their point of view,” says an anonymous source, who works in financial advice. “When we speak to people in this age group, it becomes clear that apps are how they primarily engage, rather than TV and not www. To increase and maintain engagement this is what we need. Perhaps a social media ‘money’ app would work?”
Frost agrees that apps are a key part of the financial jigsaw puzzle:
“There are some really exciting things happening in the world of fintech with apps that can help us budget, invest, save and manage our household bills: young people designing products for young people,” she says.
Education education education
Feldborg is also positive about the potential for apps to help millennials with budgeting and make it easier for them to build a savings pot over the long term. But for him, their real benefit lies in helping to improve financial education.
“It can be very hard to grasp how decisions you make today can have a very significant impact on your circumstances in 20 or 30 years,” he says. “These apps can make the future seem more tangible as they help millennials build a much better understanding of the interconnected nature of savings, loans, investment and pension products.”
But keep the human touch
Technology can be an effective way of way of making financial services more accessible and engaging for millennials, but it’s also important to balance this with the human touch.
“As a profession, we need to wise up to understanding that millennials expect us to be efficient and convenient, but also to still offer the personal touch,” says Gretchen Betts, Managing Director of Magenta Financial Planning. “Generally, the focus has been on technology to make the process of financial services slicker and generally online for the younger generation, to reduce costs, but the issue here is that you lose the face to face personal advice. This is a big issue and I believe we need to look to our counterparts in the USA who use video meetings, combined with a robo offering for investment which can be utilised by advisers for their clients.”
Another big problem, according to Jonathan Bland, Director of consultancy Pension Geeks, is that industry communications are not exciting or imaginative enough to capture the attention of millennials.
“Millennials enjoy watching YouTube videos and are influenced by popular vloggers, such as Zoella or Jim Chapman and why, because the content on these channels is authentic, relevant and relatable,” Bland says.
“This is where communications [particularly in pensions] falls behind. There’s not enough relatable information, delivered in a way that’s approachable to the audience and that is accessible within these preferred formats.”
“As a business, we constantly look to other industries, such as, fashion, retail and music to inspire us in our own communications. The pensions industry needs to break out of the box and not be afraid to be imaginative.”
Financial institutions can start making these changes today and it makes sense to engage with millennials as soon as possible, for, as Feldborg says:
“The pre-prime customers of today, with the right guidance, will become the prime customers of tomorrow,” he says.