Insights Into Millennial Banking

When it comes to Millennials and their finances — that is, if they have any finances to speak of — they may be as idiosyncratic in this arena as in nearly every other, diverging from the habits of Boomers and Gen X in ways that many traditional industries haven’t been prepared for. So how can the financial services industry learn to better connect with the world’s biggest customer demographic?

Fortunately for them, there’s an app or two for that. Moreover, reports of Gen-Y’s dislike of human interaction have been greatly exaggerated.

What? Me Cynical?

Millennials are a cynical generation in general when it comes to many of the traditional institutions prized by their parents, but no industry has felt their collective distrust as heavily as the financial services sector. The global aftermath of the Great Recession and movements in the U.S. such as Bank Transfer Day and Occupy Wall Street have made it clear that Gen Y has little faith in the people who manage the world’s money and, if they have any, their own.

“Millennials have watched their parents’ retirement take a major hit, so it becomes harder for them to see the value in traditional financial planning,” observed Aaron Hatch, certified financial planner and cofounder of Woven Capital, in a recent article in The Huffington Post. “It’s understandable that millennials don’t trust financial planners because frankly, they haven’t served them well.”

Andrew Wang, Senior VP of Runnymede Capital Management, Inc., concurs, noting that Millennials value, above all else, transparency from the people and companies they interact with. “Traditional financial services companies, on the whole, are not delivering on those things,” he said.

So are financial advisors becoming obsolete as younger generations aim to eliminate the middleman and embrace more self-service channels of the financial customer experience, such as “robo-advisors”? Yes and no.

Millennials Don’t Actually Despise Human Interaction

While Millennials do value cutting-edge digital investing tools, it turns out they also appreciate being able to access the wisdom of old-school financial advisors when given the opportunity — especially when markets get rough.

During volatile markets, like the one investors experienced in late August 2015, Millennials were more likely than older generations to consider working with a financial advisor as a result of the discomfort they experienced. According to research by Capital One, fully 39% of Millennials who did not have an existing financial advisor relationship and who experienced discomfort have sought out and opened an account with a financial advisor. By comparison, just 16% of the Boomer generation did so.

“They want to start online. They want to get informed. But that human touch, interacting with an advisor, interacting with a professional is still really valued, whereas the boomers have been through it before and have found other ways to handle the market volatility,” reported Capital One’s Yvette Butler.

Due to their tech-savvy upbringing, Millennials may be ideally wired for a combined, integral approach to investment management, according to Capital One’s findings. The company said 54% expect to use a robo-advisor account for future investing, and 60% expect to also consult a human advisor. Put simply, Millennials expect to benefit from both cutting-edge digital and good old-fashioned human-led financial advice.

Surprisingly, Capital One Investing’s research shows that 49% of Millennials already have a full-service investing account, and among those with no current financial advisor relationship, 72% say they are likely to use an advisor in the future.

Butler points out that younger people generally place more importance in working with a financial advisor to decide how to invest for retirement. For instance, the company’s research said that 42% of Millennials think it’s very important, compared with 34% of Gen Xers and 23% of Boomers who do.

Millennials Also Love Good Self-Service CX

But make no mistake: technology plays a huge role in the lives of Millennials. They’ve grown up with constant Internet access and seemingly endless amounts of information available to them on demand. Forty percent of Millennials prefer purely online customer service — more than double the percentage of Boomers. Having become so accustomed to using technology in every aspect of their lives, it only makes sense that technology also plays a significant role in their investment style.

Over the past five years, there’s been an explosion of popular online wealth management tools that cater to the needs of middle-class, tech-loving Millennials. Through cloud-based platforms, robo-advisors automatically invest and rebalance accounts according to a client’s goals and risk tolerances. Not only are the automated tools easy to use, many of them direct users’ investments to low-cost ETFs, a perfect option for young investors. With these tools investors are able to take greater control of their portfolio, accessing and changing it any time they desire. Rather than follow in their parents’ footsteps, young investors have gravitated towards automation and passively managed funds.

The experience of the Baby Boomers has been essentially the opposite. Many older people rely on investment information from peers, colleagues, or advisors over what they might read online or see on Twitter. As a result, Boomers continue to use actively managed accounts, financial advisors, and traditional brokers for their financial needs.

The embrace of robo-advisors represents a prime opportunity for financial advisors to harness technology to offer new and improved forms of self-service CX, and to thereby profit from understanding Millennial banking. Two companies at the forefront of getting this right are Personal Capital and Betterment, which both offer apps facilitating easy web-based and mobile financial management.

At the end of the day, great CX is all about offering what a customer wants and needs — how, where, and when they want and need it. By uniting the power of online financial tools in a smart synthesis with traditional human advisors, financial services may yet find a way to restore Gen-Y’s faith in banking and prepare them for a future of intelligent investing.

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