Millennials and the future of financial planning · Millennials (also known as Gen Y) are...

Millennials and the future of financial planning

March 3, 2017

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Contents

Millennials shall inherit the earth?

Implications for financial planners

Potential new business models for financial advisory firms

Conclusion

3

67%

54%

27%

87%

With their growing numbers and emerging preferences , Millennials are a segment that cannot be ignored

Source: Goldman Sachs, Deloitte analysis

Their numbers… Their wealth …

Their career aspirations… Their habits…

Millennials (also known as Gen Y) are individuals born between 1980 and 2000 who reach adulthood with turn into the 21st

century

In 2015,

40% of the global adult population are under 35 years old

2/3 of millennials are from Asia

By 2020, the total net worth of millennials is expected to double and reach

US$19 – 24 trillion

of millennials believe that the success of a business should be measured more than in terms of financial performance

of millennials started or plan to start their own business

of millennials are self-employed

millennials expect to leave their current job by 2020

80%

57% 57% 40%

of millennials

own a smartphone

of millennials would

change their bank for a

better technology

platform

of millennials compare prices in

store

of millennials buying decision is influenced by word-of-mouth and personal

recommendation

84%

of millennials

seek financial advice

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Millennials are differentiated from other generatio ns by their relative lackof future orientation and their high propensity to use digital technology

Source: Deloitte “Retooling wealth management for the digital age” (2016), Deloitte “Millennials and wealth management” (2015)

Millennials Generation X Baby Boomers & Older

Propensityfor digital

Legend: High Medium Low

Age: 18 - 34 Age: 35 - 50 Age: 51 - 69



Future orientation

Locus of control

Financial optimism

Need for cognition

Future orientation

Locus of control

Financial optimism

Need for cognition

Future orientation

Locus of control

Financial optimism

Need for cognition

Highly technically capable generation

Mid-long term financial success and

require a mix of a human and digital to enrich planning and

investment

Priority preserving wealth for family creates emotions

which requires human intervention and self-service to a

certain extent

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The Novice

There are three key Millennial archetypes that fina ncial planners and financial advisory agencies need to be cognizant of

The Loner The Cautious

Source: Deloitte “Millennials and wealth management” (2015), Deloitte analysis

Low financial knowledgeYour future investor

Self-directed Your future enthusiast

Negative perception Your future referrer

The three key millennial archetypes relevant for the financial services industry:

Passive

Low attention span

Desire convenience and simplicity

Digitally savvy

Comfortable with virtual communication

Comfortable with complexity

Detail-oriented

Impatient

Desire personalisation and customisation

Independent

Traditional

Require clear information

Values transparency

Consults and compare with peers

Risk averse

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Millennials constitute a significant share of a dig itally connected Singapore population

22%

% of millennial population in Singapore

22% of the population in Singapore are millennials

Source: Ipsos, Straits Times , Deloitte analysis

Singapore digital consumption

3.4hours

Average time Singaporean millennials spend on their phones daily

4.65 million Total active internet users

3.60 million Total active social media users

8.22 million Total mobile connections

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Financially, Singapore Millennials want to save but not necessarily for retirement, are largely self-directed in their rese arch and open to innovations

SG millennials investment decision making

Source: LinkedIn, LGT, Deloitte analysis

Majority of the millennials are

validators

SG millennials openness to financial offerings from non-financial brands

36%54% SoloistConduct their own research and make decisions

Validators Conduct their own research but validate decisions with advisors

59%

More than half of the millennials are open to

offerings from non-financial brands

Top brands considered include:

0%

60%

40%

80%

20%

70%

50%

10%

30%

Millennials Pre-retirees

45-5435-44

(% of respondents)

To support my parents

Retirement

A home

Healthcare / medical costs / emergencies

Children’s education

A rainy day fund

A rainy day fund is the top saving priority for

millennials

Top savings priorities by age group in SG (2016)

10%

Others

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Contents




Conclusion

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Service industry jobs are evolving which makes it i mperative for financial planners to adapt and augment too

Source: News reports, Deloitte analysis

In SG’s wealth management industry, RMs are increasingly being supported by technology

Automation of routine processes

Omni-channel interaction with clients (e.g. online, mobile etc.)

Artificial intelligence to analyse data

Mobile applications

This is also happening in other service industries

Hea

lthca

reA

ccou

ntin

gLe

gal

Cognitive Technology increases the ability to analyse information from multiple sources

Automation of tedious tasks such as data entry

Artificial intelligence helps to improve efficiency by helping with long and repetitive research tasks

Virtual libraries increase efficiency be enhancing research and enabling flexible work arrangements

SG Govt has initiated several programmes to encourage

continuous learning and skill upgradation

Provides Singaporeans with opportunities to develop their potential through subsidised courses

Tele-health enables doctors to provide timely advice to patients

Automated pharmacy systems enables pharmacists to efficiently dispense medication

Non-tech Tech

Customer orientation Communication Real-time accessibility Innovative engagement model

Financial planners will need to enhance their skillsets by adopting both non-tech and tech capabilities

1

2

Offers learning opportunities for seniors

3MoM’s Retirement and Reemployment Act ensures continued employability by offering re-employment to senior employees

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Customer Orientation

Financial planners targeting millennials need to re -orient their customer orientation and build effective communication capab ilities


Non-tech capabilities

CommunicationW

hat n

eeds

to c

hang

e?W

hy?

Financial planners need to change their mindset and recognise that millennials can be sustainable long-term client relationships

Establishing and gaining trust of millennials is key

What needs to change?

Why?

Millennials require greater assurance due to market volatility exposure – dot-com bubble burst (2000) and financial crisis (2008)

Millennials are typically skeptical of formal advice to start with

Adapt communication methods (e.g. social media, online etc.)

Adapt what is communicated –be relevant and provide solutions to challenges (E.g. focus on current needs but offer prospect of future hopes)

Be transparent and simplify when providing information on investment products

Millennials need to be engaged and focused on long-term growth

Millennials quickly get wary of cases where financial planers have tried to sell complex and sometimes faulty products

Technology has heightened expectations of transparency

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Financial planners need to increasingly adopt real- time accessibility and innovative engagement models to meet millennials’ e xpectations


Techcapabilities

Real-time accessibility Innovative engagement model

Wha

t nee

ds to

cha

nge?

Why

?

Ability to use video technologies for virtual meetings

What needs to change?

Why?

Millennials are conversant with using handheld devices

Access to real-time information has become the norm

Millennials prefer not to meet in offices as they perceive it as stifling and requiring too much time and effort

Quality financial planning software to paint out possible investment scenarios graphically

Enhance interactivity through gamification of accounts

Millennials respond better to visuals

Millennials have relatively shorter attention spans

Mastering the use of smartphones and tablets

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Contents



Potential new business models for financial advisor y firms

Conclusion

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Financial advisory firms have the opportunity to tw eak their business models to attract Millennials as end-clients, employees and to tap in to their network

Source: Deloitte analysis

There are three options financial advisory agencies can consider:

Financial planners need to be adequately empowered to cater to different millennial archetypes that have varying behavioural traits

The noviceLow financial knowledge

Your future investor

The lonerSelf-directed

Your future enthusiast

The cautiousNegative perception

Your future referrer

Attract millennials as customers

1Attract millennials as

employees

2Leverage the millennial

network to attract millennials

3

• Advisors are empowered with tools and given the flexibility

• Supportive compliance department

• Support from marketing team

• Firm is committed to employee growth

• Establish a culture of collaboration

• Cultivates relationships among employees

• Tap into the networks of millennial university graduates

• Locate offices near to universities

• Leverage on university activities

Company X Company Y Company Z

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How has Company X been able to target millennials a s clients?

1

Source: Company websites and news reports, Deloitte analysis

Financial planners are offered a range of digital tools and given the flexibility to engage millennials in their unique ways

A savvy and responsive Compliance department provides support to financial planners with a framework to help them understand the meaning of various regulations and how to work within them to achieve the goals of millennials

Support from the marketing team empowers financial planners to achieve versatile marketing (e.g. client communications, prospect marketing, brand building and strategic alliances) to better target millennials

About Company X

1,710 Advisors Total AUM:~ $114 Billion USD as of 2016

• Broker / Dealer

• Investment advisory

ILLUSTRATIVE EXAMPLE

Company X

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How has Company Y been able to attract millennials as employees?


About Company Y

• Trust administration

• Retirement plan division

• Wealth management

• Family office

100+ employees 13.8% increase in new assets from 2013 to 2016

Demonstrates commitment to employees by getting to know individuals’ non-tech and tech competencies, and aspirations in order to invest in their growth as financial planners

Cultivates employee relationships through social events (e.g. regular 4.01pm get-togethers) to show appreciation, nurture and build trust and encourage strong relationships between employees

Established a culture of collaboration and supportive environment with many opportunities (e.g. training, freedom to innovate) for millennials to work and build their careers in the firm

2


Company Y

16

How has Company Z been able to target millennials t hrough network effect?


About Company Z

• Old-age provision

• Wealth management

• Non-life insurance

• Health insurance

~2000 client consultants

Total AUM:~32 Billion USD

as of 2016

Advisors start building relationships with university graduates pr ior to graduation by leveraging on university activities (e.g. free interview tutorials, organising trips to job fairs and public speaking training)

3


Built a strong clientele base of university graduat es such as engineers, lawyers and doctors who have a network of peers in similar professions

Strategically located their network of offices in close proximity with important university locations to be close to their target market

Company Z

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Contents




Conclusion

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In summary, there are five relatively quick-wins wh ich can be no-regret moves for financial planners looking to be successf ul with millennials

01

02

03

04

05

BECOME TECH-SAVVY and adopt capability enhancing tools

ADAPT TO SOCIAL MEDIA , gamification and other millennium friendly modes of communication and leverage on the network of millennials

SIMPLIFY PRODUCT EXPLANATIONS and the SALES PROCESS to address shorter attention times

USE VISUAL SCENARIO PLANNING to lay out the possible futures and its implications on current investment needs

BUILD MOBILITY and REAL-TIME ACCESSBILITY across all parts of the value chain

Option for financial planners to also collaborate and encourage their financial advisory firms to invest in building these capabilities to provide support and

jointly position for sustainable growth through the millennial segment

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