Millennials and the future of financial planning. March 3, 2017

Transcription

1 Millennials and the future of financial planning March 3, 2017

2 Contents Millennials shall inherit the earth? Implications for financial planners Potential new business models for financial advisory firms Conclusion 2

3 With their growing numbers and emerging preferences, Millennials are a segment that cannot be ignored Millennials (also known as Gen Y) are individuals born between 1980 and 2000 who reach adulthood with turn into the 21 st century Their numbers In 2015, 40% 2/3 of the global adult population are under 35 years old of millennials are from Asia By 2020, the total net worth of millennials is expected to double and reach US$19 24 trillion Their wealth 87% Their career aspirations of millennials believe that the success of a business should be measured more than in terms of financial performance 54% of millennials started or plan to start their own business 84% 80% Their habits 57% 57% 40% 67% millennials expect to leave their current job by 2020 Source: Goldman Sachs, Deloitte analysis 27% of millennials are selfemployed of millennials seek financial advice 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 3

4 Millennials are differentiated from other generations by their relative lack of future orientation and their high propensity to use digital technology Millennials Generation X Baby Boomers & Older Age: Age: Age: Future orientation Future orientation Future orientation Locus of control Locus of control Locus of control Financial optimism Financial optimism Financial optimism Need for cognition Need for cognition Need for cognition Propensity for digital Highly technically capable generation Propensity for digital Mid-long term financial success and require a mix of a human and digital to enrich planning and investment Propensity for digital Priority preserving wealth for family creates emotions which requires human intervention and self-service to a certain extent Legend: High Medium Low Source: Deloitte Retooling wealth management for the digital age (2016), Deloitte Millennials and wealth management (2015) 4

5 There are three key Millennial archetypes that financial planners and financial advisory agencies need to be cognizant of The three key millennial archetypes relevant for the financial services industry: The Novice The Loner The Cautious Low financial knowledge Your future investor Self-directed Your future enthusiast Negative perception Your future referrer Low attention span Detail-oriented Require clear information Desire convenience and simplicity Digitally savvy Impatient Desire personalisation and customisation Values transparency Risk averse Comfortable with virtual communication Passive Independent Comfortable with complexity Consults and compare with peers Traditional Source: Deloitte Millennials and wealth management (2015), Deloitte analysis 5

6 Millennials constitute a significant share of a digitally connected Singapore population % of millennial population in Singapore Singapore digital consumption 22% 3.4 hours Average time Singaporean millennials spend on their phones daily 4.65 million Total active internet users 22% of the population in Singapore are millennials 3.60 million Total active social media users 8.22 million Total mobile connections Source: Ipsos, Straits Times, Deloitte analysis 6

7 Financially, Singapore Millennials want to save but not necessarily for retirement, are largely self-directed in their research and open to innovations Top savings priorities by age group in SG (2016) (% of respondents) 80% 70% 60% 50% 40% 30% A rainy day fund is the top saving priority for millennials SG millennials investment decision making Validators Conduct their own research but validate decisions with advisors Others 10% 54% Majority of the 36% Soloist millennials are Conduct validators their own research and make decisions SG millennials openness to financial offerings from non-financial brands 20% 10% 0% A home Millennials Children s education Preretirees To support my parents More than half of the millennials are open to offerings from nonfinancial brands 59% Top brands considered include: Retirement A rainy day fund Healthcare / medical costs / emergencies Source: LinkedIn, LGT, Deloitte analysis 7

8 Contents Millennials shall inherit the earth? Implications for financial planners Potential new business models for financial advisory firms Conclusion 8

9 Service industry jobs are evolving which makes it imperative for financial planners to adapt and augment too In SG s wealth management industry, RMs are increasingly being supported by technology Automation of routine processes Mobile applications Artificial intelligence to analyse data Omni-channel interaction with clients (e.g. online, mobile etc.) Healthcare Legal Accounting This is also happening in other service industries Automation of tedious tasks such as data entry Cognitive Technology increases the ability to analyse information from multiple sources 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 Tele-health enables doctors to provide timely advice to patients Automated pharmacy systems enables pharmacists to efficiently dispense medication SG Govt has initiated several programmes to encourage continuous learning and skill upgradation Provides Singaporeans with opportunities to develop their potential through subsidised courses Offers learning opportunities for seniors MoM s Retirement and Reemployment Act ensures continued employability by offering re-employment to senior employees Source: News reports, Deloitte analysis Financial planners will need to enhance their skillsets by adopting both non-tech and tech capabilities Non-tech Customer orientation Communication Real-time accessibility Innovative engagement model 9 Tech

10 Financial planners targeting millennials need to re-orient their customer orientation and build effective communication capabilities Customer Orientation Communication What needs to change? Why? 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 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 Non-tech capabilities 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 What needs to change? Why? Source: News reports, Deloitte analysis 10

11 Financial planners need to increasingly adopt real-time accessibility and innovative engagement models to meet millennials expectations What needs to change? Why? Real-time accessibility Mastering the use of smartphones and tablets Ability to use video technologies for virtual meetings 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 Tech capabilities Innovative engagement model 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 What needs to change? Why? Source: News reports, Deloitte analysis 11

12 Contents Millennials shall inherit the earth? Implications for financial planners Potential new business models for financial advisory firms Conclusion 12

13 Financial advisory firms have the opportunity to tweak their business models to attract Millennials as end-clients, employees and to tap into their network Financial planners need to be adequately empowered to cater to different millennial archetypes that have varying behavioural traits The novice Low financial knowledge Your future investor The loner Self-directed Your future enthusiast The cautious Negative perception Your future referrer There are three options financial advisory agencies can consider: 1 Attract millennials as customers 2 Attract millennials as employees 3 Leverage the millennial network to attract millennials 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 Source: Deloitte analysis 13

14 1 Company X How has Company X been able to target millennials as clients? ILLUSTRATIVE EXAMPLE 1,710 Advisors About Company X Broker / Dealer Investment advisory Total AUM: ~ $114 Billion USD as of 2016 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 Source: Company websites and news reports, Deloitte analysis 14

15 2 Company Y How has Company Y been able to attract millennials as employees? ILLUSTRATIVE EXAMPLE 100+ employees About Company Y Trust administration Retirement plan division Wealth management Family office 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 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 Cultivates employee relationships through social events (e.g. regular 4.01pm gettogethers) to show appreciation, nurture and build trust and encourage strong relationships between employees Source: Company websites and news reports, Deloitte analysis 15

16 3 Company Z How has Company Z been able to target millennials through network effect? ILLUSTRATIVE EXAMPLE ~2000 client consultants About Company Z Old-age provision Wealth management Non-life insurance Health insurance Total AUM: ~32 Billion USD as of 2016 Built a strong clientele base of university graduates 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 Advisors start building relationships with university graduates prior to graduation by leveraging on university activities (e.g. free interview tutorials, organising trips to job fairs and public speaking training) Source: Company websites and news reports, Deloitte analysis 16

17 Contents Millennials shall inherit the earth? Implications for financial planners Potential new business models for financial advisory firms Conclusion 17

18 In summary, there are five relatively quick-wins which can be no-regret moves for financial planners looking to be successful with millennials 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 18

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