21 July 2014
Four strategies for dealing with millennials – and one misconception
Young people are struggling with financial problems like college debt and underemployment. At the same time, they put a high value on transparency and do not always trust financial institutions. Their expectations of online and mobile services are often higher than what banks can currently offer, but at the same time their financial literacy tends to be quite low.
Members of Generation Y (or millennials as they are sometimes called) introduce new challenges for the financial services industry. They are born somewhere between the early eighties and late nineties and grew up in the digital age. The research firm Corporate Insight recently published a report on this generation and how the financial industry should deal with them: The Millennial Shift: Financial Services and the Digital Generation.
Transparency and technology seem to be the keywords in approaching this young generation. Millennials know very well why financial services firms are in business (that is: to make profit). According to James McGovern, vice president of consulting services at Corporate Insight, ‘any perceived attempt to take advantage of consumers by hiding fees or upselling them products or services they don’t need’ impose a serious barrier when dealing with millennials.
The report mentions four different strategies institutions use to reach millennial clients:
Focus on mobile
Generation Y is so attached to their smartphones that they are much more likely to interact with their bank through a mobile platform than in person. Millennial customers demand fast and easy mobile access to their bank account, regardless of the device or platform they are using.
Break down psychological barriers
The biggest challenge in dealing with Generation Y members is breaking down psychological barriers. This is especially true for investment firms, since various studies have found millennial investors to be conservative – calling them everything from a “lost generation” to “scarred” investors. The solution to this challenge would be to offer them low-cost guidance and (again) strong mobile and online services.
Focus on retirement plans
Few millennials are saving enough money for their retirement. An even smaller part of this generation knows how much they should be saving. Retirement plan providers fail to build a direct relationship with millennials, according to the Corporate Insight report. Their poor online and mobile presence could very well be one of the reasons why there is a gap between these institutions and this generation: they have been found to be ‘worse than banks and online brokerages for website design navigation, functionality and overall user experience’.
Understand their behaviour and demographics
Millennials tend to do many things differently than their parents. For one, they are delaying home buying and starting families. Also, women are more likely to be primary breadwinners for households in this generation than in older ones. These demographics are especially relevant to insurance companies that aim to win new business from this target group.
At the same time, there are many myths about Generation Y and how they should be approached. The Financial Brand listed eight misconceptions about them. “The biggest myth about Generation Y members might be that they don’t care about their finances”, is how Larae Kraemer, President and CEO of K-State Federal Credit Union, describes it. “We don’t think that’s true. I think there is a lot of information and data out there that says they’re highly involved in what is going on and that they do care and they need to be in control with what they’re doing.”