How do young Millennials feel about the investing services on offer traditional wealth management firms? We commissioned fintech researcher and writer, Hannah Duncan to explain the significant culture and values gap that exists between new generation customers and the financial brands: something that digital leaders in these firms need to understand and address in order to win over new generation clients.
The views expressed here belong to the author and do not necessarily reflect the position of CREALOGIX, its partners, or clients.
Traditional Wealth Managers are not cutting it with us Millennials.
A quarter of us based in the UK believe tech companies would do a better job of delivering financial services than banks. Only a third believe that their bank offers services designed for them.
One Deloitte report found that 60% of Millennials with an income of over £75,000 trust a robo-advisor more than a financial advisor. It’s not surprising. Given the 2008 crisis and impending climate crisis, we feel let down by the people in charge of investing money. Now, we find that banks are behind when it comes to delivering quick, pain-free digital services. A little calculator to access our accounts, two days to process a transaction, charges for international transfers … it’s all very 2000s.
With this feeling in the air, the rise of fintech was inevitable. 2020 MSCI research shows how Millennials flock to robo-advisors more than any other generation. While only about 20% of us currently use them, it’s anticipated to shoot up. Deloitte research predicts a near eight-fold in robo-advisor AUM within the next half-decade, from $2.2 trillion today to $16 trillion in 2025.
Starting with low investment thresholds – just £1 in many cases – robo-advisors were interested in us from the start, before we had money. Why would we depart them for a less convenient alternative, which doesn’t even seem to match our values?
Millennials have money to invest
Despite our mounting debts, younger demographic groups do have money to invest: 67% of Millennials in the UK and Ireland regularly save money. However, the service we need and expect is not being provided. Everything from our haircuts to our shopping is done on an app in seconds.
We’re not in the 1980s anymore, we don’t call ahead for a taxi, we tap for an Uber. Traditional firms can’t expect us to go backwards and change our preferences just so that we can be their preferred style of customers.
Wealth managers have been late to the party when it comes to B2C tech. We’re digitally native customers, so when a firm can only handle common processes with face-to-face meetings and paper forms sent through the post, we’re cringing for you. While we’re tapping for that Uber, I picture members of the C-Suite who can probably only call for a taxi through their assistant. Why would we opt for someone who shows so little interest in what we like, and seems to have so little in common with us? That wouldn’t make sense.
Of course we’re drawn to fintech. It takes seconds to do an instant transaction and it’s simple to use. Convenience is everything. But even the best robo-advisory propositions are lagging behind customer expectations set by challenger banks. The financial brands which can deliver this to Millennials, in line with our values, have a better chance of being “our” new wealth managers.
So far, not many of the best-established firms in the wealth management world are well-established in terms of brand value among younger clients. We’re just not impressed by lengthy processes, especially when they involve in-person visits or paperwork. Services like that are more suited towards our parents.
Respect new customers’ values
What can traditional wealth managers do to fix this? While a lot of the damage seems to have already been done, committing to meaningful sustainable investments and improving their digital offering seems a good place to start.
The investment industry is still full of “sustainable” funds and portfolio recommendations that include global brands well known for dubious track records in health, plastic pollution, or simply directly harmful business models in the form of fossil fuels or tobacco… investment managers continuing to drive money into these things are just not getting it. We need an investment manager who is relevant for us and our beliefs. A manager who is transparent about their investments and genuine in their desire for change. When managers promote ESG but take more than ten business flights a year or only include women to do the admin, it becomes meaningless.
We’re smarter than that. We’re never going to give our money to people we don’t trust. Our Wealth Managers will commit to our values, be transparent and hold themselves accountable.
Wealth Managers also could think more like fintechs and make better use of machine learning. Lengthy compliance procedures and internal controls may need to be reconsidered if they want to future-proof themselves. We’re never going to go for paper processes over hassle-free apps.
Convenience is not a luxury, it’s a requirement.
Why would we take hours when we can do it in seconds? Our finances should empower us, not drag on like a wet rag. Helpful and proactive managers, who care about us even when we’re not rich, are what we want.
So, all in all, what would I say to traditional Wealth Managers? I’d say that the burden of proof is on you. To convince me that you’re not greenwashing my portfolio or taking far too long to process run-of-the-mill digital transactions. If you can genuinely prove that and be better than the robo-advisors available, I’d switch tomorrow. For now, I’m staying put.