There are more than 11 million millennials in the UK. Those aged between 20 and 35 make up the third largest cohort in the UK. It is a client group not to be ignored and in need of attention.
But is the financial services profession ready to service the next generation of clients?
There are key differences in how millennials approach investing and what factors they consider important when making financial planning decisions. They differ from previous generations, not only in how they want to invest but also in what they want to invest in.
One factor that comes up frequently among next gen and female investors is their emphasis on environmental, social and political impact. This is a much greater consideration for them when making investment decisions than the average person and the older generation.
According to a report by the Canadian Responsible Investment Association (RIA), 58% of millennials are interested in investments that advance social or environmental causes compared with just 25% of baby boomers.
This opens up opportunities for newcomers in the finance industry that focus on these factors within their investments. I have seen an increase in products and firms emerging with a specialised focus.
Another hugely important factor is being able to offer high-tech solutions. There have been numerous articles in the past few years talking about the decreasing attention span of humans.
Whether that is correct or not, it is true that in this technological age, we are connected 24/7 and have an overload of information. Therefore, it is naturally becoming harder to focus and more importance is put on effective and fast solutions.
No wonder the next generation prefer companies that embrace technological advancement and are can offer more effective ways of communication and servicing.
In addition, it has opened up certain asset classes for retail investors that in the past were only available to the institutional clients. One example is real estate platforms that enable clients to build a portfolio of real estate investments with an initial cash injection of just £100.
Access to lending platforms, private equity and no doubt more and more investment opportunities will be opening up for this new age of investors. Companies that can offer these solutions and on-board new investment opportunities quickly will be the ones connecting with next gen clients.
New way of working
One final factor that will change how the next generation looks at retirement planning is flexible working and longer working lives overall. With globalisation in full swing, many individuals now choose flexible working.
They forego one full-time job in favour of multiple projects across multiple jurisdictions. And they tend to change jobs more often than their parents did, while also having longer working lives.
This will have a huge effect. It is hard to say what the exact effect will be but it is something that requires a closer look.
The old-fashioned way of looking at financial planning is dying out and will not stand the test of time. It is important to embrace the new age, develop an online presence, invest in tech advancements and change the way we communicate and address clients’ needs.
Indre Butkeviciute is managing director of Lily Advisory.