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Millennial banking: a brave new world

11th Jan 2016
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Financial services is one industry that stayed relatively unchanged for many years. However, this all changed with the rise of millennials, whose financial habits and preferences vary wildly from those of their parents - the Baby Boomers.  In the wake of this generation reaching an age where they are accessing financial services, the industry has had to adapt its approach to engage with this particular demographic.

In general, there is a certain cynicism among the millennial generation when it comes to many of the traditional institutions that are still well-respected by their parents, but one of the industries that has experienced this distrust most is the financial services sector. Following the reverberations of the financial crisis across Europe and the world there is a general malaise towards those that manage money.

“Millennials have watched their parents’ retirement take a major hit, so it becomes harder for them to see the value in traditional financial planning,” observed Aaron Hatch, certified financial planner and cofounder of Woven Capital, in a recent article in The Huffington Post. “It’s understandable that millennials don’t trust financial planners because frankly, they haven’t served them well.”

Andrew Wang, Senior VP of Runnymede Capital Management, Inc., agrees, suggesting that one of the things that millennials trust the most is transparency from any company they interact with. “Traditional financial services companies, on the whole, are not delivering on those things,” he said.

So are financial advisors becoming obsolete as younger generations aim to eliminate the middleman and embrace more self-service channels of the financial customer experience, such as “robo-advisors”? Yes and no.

During volatile markets, such as those of late August 2015, millennials were more likely than older generations to consider working with a financial advisor as a result of the discomfort they experienced.  According to research by Capital One, 39% of Millennials with no financial advisor that were feeling discomfort during the downturn,  sought out and opened an account with a financial advisor. In comparison, only 16% of the Boomer generation took this approach.

Having been brought up surrounded by technology, millennials are skilled at gathering all the information they need and making an informed decisions, whether this means ultimately means getting advice from a human, or elsewhere.  Capital One found that 54% expect to use a robo-advisor account for future investing, and 60% expect to also consult a human advisor. Put simply, Millennials expect to benefit from both cutting-edge digital and good old-fashioned human-led financial advice.

That said, there’s no doubting the enormous impact that technology and instant access to data on demand has had on the lives of millennials, and this, in turn, has impacted on their investment strategy. Over the past five years, there’s been an explosion of popular online wealth management tools, which cater to the needs of millennials. Using the Cloud, robo-advisors can automatically invest and rebalance accounts according to a client’s goals and risk tolerances. These tools are easy to use and are the perfect solution for young investors, taking greater control of their portfolio, accessing and changing it any time they desire – a style of automation and passive decision making that many millennials prefer.

As millennials begin down their investment path, robo-advisors represent an interesting opportunity for financial advisors to deploy technology that offers new and improved forms of self-service CX, which really understand the needs of their millennial customers.

At the end of the day, when it comes to great CX, the key is providing a service a customer wants and needs in the exact way that they want and need it. Through online financial tools in conjunction with traditional human advisors, financial services may yet capture the hearts and minds of young millennials investors, winning them back round to the industry with a service built for them.

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