Managing millennial money

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We are on the precipice of a $30-trillion transfer of wealth1 from baby boomers to Generation X and millennials. However, it’s going to be anything but business-as-usual over the next 30 years. The demographic inheriting this windfall loves technology and embraces change and disruption. Yet at the same time, “wealth management is one of the least tech-literate sectors of financial services.”2 This is a clear red flag for old-school service providers who are unable to evolve.

Ultimately, the financial companies who emerge as winners will need to understand consumer preferences and leverage new technologies. The changes are already happening, evidenced by the onset of “robo advisors” and, increasingly, with social aspects of investment management.

Five keys to positioning for the impending massive wealth transfer

1. Millennials are the first digital native generation. They have a distinct set of expectations, such as enhanced communication, transparency, convenience, and readily accessible products. Furthermore, millennials generously share private information and expect in return a customized experience at low cost, if not free.

2. Millennials have a collective inherent distrust of banks, partially due to witnessing pivotal financial moments like the Great Recession, the bursting of the first technology bubble, and the Madoff Ponzi scheme. A better digital experience with more transparency and customer-centric models are characteristics that will be necessary to engage the massive opportunity with millennials.

3. Traditional financial advisors will be supplanted. The emergence of robo-advisors was an early signal that crowdsourced information will be key to engaging millennials. For example, communal discussions are seen as providing a more intimate investing experience to a generation comfortable with (over)sharing. Millennial investors seem to prefer information received from social media, which means they can participate without relying on traditional financial outlets, a financial advisor, or an institutional analyst’s view of the market.

4. Online investment clubs and social trading are being embraced, as ways to help millennials collaborate and navigate the challenging wealth management landscape. Social trading differs slightly from robo-advising, as it allows users to automate trades to follow individual traders based on performance, investment style, or relationship. Millennial investors appear to value crowdsourcing and the validation that comes from transparency and peer review.

5. Millennials’ lifestyle priorities will challenge traditional advisor models. This group’s savings objectives are far different from those of other demographics and appear eager to pursue goals that are less focused on wealth accumulation. Plus, major life choices such as marriage, children, and college funding are being pushed to later in life, so it may be some time before millennials prioritize savings. These preferences will defer the need for traditional financial advice.

It may be early days, but it is critical to engage the millennial group and make inroads as early as possible. To do so, incumbents will have to understand these preferences and, in response, create a more human and credible marketplace position by using the tools this demographic prefers.


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Julien Courbe

Financial Services Leader, PwC US

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