One of the biggest opportunities for the advice profession will be the mass transfer of wealth from the baby boomer generation to millennials. Opening our Next Generation conference last week, Eliza Filby set about debunking some generational myths.
She offered young advisers and wealth managers an insight into how best to understand the next generation of savers and investors.
Filby (pictured) suggested boomers were the ‘privileged generation’, having grown up in a period of ‘economic stability’ with a social welfare system and access to a whole wave of opportunities their parents didn’t. She added they were the ‘chief beneficiaries of the boom’ during Margaret Thatcher’s premiership.
Boomers were the first and last generation to experience a three-stage life: education and training; a long period of steady employment; and now a long retirement.
Their collective wealth has also increased from £9.9 trillion to £11.1 trillion since the financial crisis, the only generation in the UK to enjoy an increase over the past decade.
While both UK millennials and baby boomers value the prospect of a house and financial stability, the advice profession will need to abandon its old paradigms.
‘For too long, your industry has ridden the baby boomer wave of thinking about financial institutions, investments and savings,’ she said. ‘Millennials think very differently.
‘They are earning 13% less than Generation X did at their age and 30% of millennials are in debt between £30,000 and £50,000 due to student debt.
‘They have lived in a period of low interest rates, which has meant debt has been normalised, whereas saving has been disincentivised. Their real struggle is the rising costs of rent and the inaccessibility of house buying.’
Filby said millennials prize experiences over assets, access over ownership, and are distanced from financial transactions due to technology, rendering spending less visible.
They will have a multi-stage life, having to dip in and out of employment to retrain as automation nips at their heels. They will thus have different savings and investment habits compared with the long-term stable accumulation of their predecessors.
Filby said millennials are seeking credible sources in the age of fake news, and financial education must tie in with their values in terms of social responsibility. Digital and video mediums are a must, as well as the ‘gamification’ of the investment process, such as seeing future versions of themselves based on current savings and investment behaviours.