You have heard of baby boomers, perhaps you are aware - or even one - of Generation X but the market of the future for any business here for the long term are the millennials.
These are the people born between 1980 and 2002.
They are vitally important for UK financial services and we need to understand what makes them different.
BNY Mellon worked with a research team at Cambridge University to explore millennials’ understanding of the financial choices available to them; their educational and product needs; and their attitudes to social finance.
This report is entitled Generation Lost: Engaging Millennials with Retirement Saving. I would urge you all to read a copy.
The report surveyed millennials (those born between 1980 and the turn of the century) across six key markets - Australia, Brazil, Japan, the Netherlands, the UK and the US.
The researchers engaged with a broad range of millennial populations: in emerging and emerged markets; in countries with a collective approach to retirement and those relying on a unit-linked system; and those with access to compulsory and voluntary pension schemes.
Why are millennials different?
The key finding was that many millennials face a less comfortable retirement than their parents and their grandparents as a result of demographic, political and macro-economic trends.
Yet many are unaware of the realities of the future that awaits them. Their lack of understanding of financial matters appears to be as much a result of a lack of education and information as any lack of interest.
Their buying habits, preferences and biases have been driven by the environment in which they have grown up. They have witnessed a period of rapid change, including huge technological leaps.
This is the generation who have never used a pay phone, and where smartphones have become an extension of their body and perceived as essential for their lives.
This world has shrunk faster than witnessed by any other generation as globalisation allows shared experiences and norms across cultures and countries.
The great events of this generation have been climate change and economic upheaval, which have shaped their social responsibility and how they now view and respect finance.
The UK findings are particularly insightful:
- 48 per cent of UK millennials do not receive any information on financial matters through their workplace or educational establishment.
- 42 per cent of UK millennials estimate the size of the fund they will need for retirement by taking a “blind guess” rather than basing it on industry data, with a further 51 per cent taking an “educated guess”.
- 77 per cent want to be told the “stark reality” of their post-retirement finances.
- UK millennials would allocate 40 per cent of their portfolio to social finance products.
- 95 per cent of millennials feel that pension funds and insurers provide limited, poor or no options for investing in social finance products.
- 70 per cent of UK millennials would save more if their pension allowed multiple lifetime withdrawals.
The report offers a number of potential avenues which would allow financial services providers such as life insurers, banks and asset managers to reach out to millennials in new ways:
“The financial services industry needs to do more to promote financial education by partnering with grassroots financial education providers, engaging with schools and universities, and lobbying national governments for change,”
“Young people need regular engagement through multiple channels if they are to be equipped to deal with the challenges they face and provide for their own retirement.”
“Without a new approach, we face a real risk that the millennial generation will become Generation Lost – lost both to the financial services industry and in terms of its own readiness for retirement”.
Questions appear on the last page of this article.