Helping millennials start saving

With millennials set to overtake baby boomers in “sheer size” over the next few decades, the wealth-management industry must prepare itself better for the imminent intergenerational wealth transfer expected to take place, suggests a new report from Boston-based financial consulting firm Celent LLC.

Industry estimates cited in the report project that the millennial generation’s net worth would multiply by five times in 15 years — to $20 trillion by 2030 from just $4 trillion in 2015.

“Millennials will be part of one of the largest intergenerational wealth transfers to date as baby boomers retire from the workforce and begin to pass down their wealth to their children,” says the report.

In anticipation of this asset handoff, wealth managers will have to reshape their businesses to appeal to millennials, generally defined as those born between 1982 and 2000, the report says.

That might entail leveraging digital technology to fine-tune client segmentation, offering mobile access to accounts, engaging over social media and developing a hybrid advisory offering, the report suggests.

To capture this maturing market, segmenting clients only by their asset levels and risk profiles is not enough, the report says. Rather, it will need to encompass clients’ financial goals as they make the transition to different stages of their lives.

Advisors might also account for millennials’ different attributes by tweaking their interactions based on, for example, whether they have a moderate level of financial literacy and prefer to invest responsibly, the report suggests.

Advisors also have the difficult task of persuading millennials to hire them on. Citing a 2016 survey from Jefferson National Financial Corp., the Celent report notes that almost half of millennials polled don’t rely on an advisor to manage their finances, owing to a variety of reasons, such as the high entry bar set for asset threshold, a perceived lack of transparency and the absence of sophisticated digital solutions.

Capturing the millennial market may pose challenging for advisors who have yet to integrate technology into their workflow. But the report points to developments within the industry designed to assist even the most reluctant advisor to engage more frequently with clients online.

Jumping through regulatory hoops, for example, may be less tricky for firms that have adopted a compliant social-media platform to chat with clients online.

Although millennials are not a monolithic mass, the report notes that they tend to be tech-savvy, philanthropic-minded and risk-averse toward the stock market, having come of age amid the 2008 global financial meltdown and witnessing the protracted fallout on the job market.

This younger generation, the report adds, has also exhibited a preference for simplified products, such as ETFs, as well as for responsible investments.

Awareness of these general preferences, the report says, can help wealth managers adapt their practice to meet the needs of this ascendant demographic.

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