On the surface, millennials may come across as a paradox to the financial marketer. On one hand, it is estimated they will inherit a massive $30 trillion in wealth from baby boomers. On the other, the group is said to be slower than boomers to embrace investment products and are much more conservative investors overall. Eighty-five percent of millennials (defined as those ages 22-35) describe their risk tolerance as conservative, with 52 percent qualifying further as “very conservative” (Legg Mason). This attitude explains why millennials hold just 15 percent of their investments in equities but 65 percent in cash.
There are many reasons why millennials act this way. They are not just conservative, but they also have much less to invest. The group that carries $1.0 trillion in wealth also owes $1.2 trillion in student debt. And it’s unlikely that millennials will be the last generation to be burdened by these loans. The U.S. Department of Education estimates that the cost of college will increase, on average, by 6.5 percent year-over-year in the U.S. With the cost of a four-year, public degree hitting $200K+ in the next 12 years, we’ll likely see many of millennials’ prevailing behaviors bleed into the next generation.
For financial services companies, this doesn’t mean that pitching investment products to millennials is a dead end. Rather, it’s an opportunity for these businesses to meet the unique needs of a customer segment with huge growth potential (remember: while not yet rich, a quarter of millennials are considered high-earners). Here are some tips for targeting these investors:
- Know they are not as unusual as you may think: Millennials may seem unique to financial services companies, but their behaviors are actually more closely aligned with middle-aged investors (Gen X aged 36-55). Neither group is as prolific as boomers (aged 56-72), who are much more engaged in financial services products and news, across the board, and more likely to interact with an ad or financial content. According to Dianomi’s proprietary data, boomers generally expressed more interest (usually 40 percent or higher) in financial services product than any other investor group.
- Pitch them the basics: Our data found that millennials are not actually disengaged in finance. Rather, in some cases, millennials are more engaged than their middle-aged counterparts (Gen X) or almost as engaged with them. For example, millennials demonstrated intent in basic financial products, such as bank accounts and credit cards. Specifically, with regard to bank accounts, millennials are about 14 percent more interested than Gen X. Millennials are also almost equally interested in credit cards as Gen X.
- Understand their timing: Some millennials are thinking about their future in terms of mortgages and IRAs but demonstrate product interest that is far behind baby boomers and slightly behind Gen X. Dianomi’s data shows that millennials are half as interested in IRAs and mortgages compared to boomers.
- Work on building trust: Millennials are half as interested in financial advice products than baby boomers and less interested generally in financial planning products, validating a recent Deloitte study that found that “millennials have a negative perception of financial planners” and the need to overcome this with pricing transparency.
- Offer socially aware products: Millennials are known for prioritizing happiness and work-life balance. Although they may earn less money, or have higher debt related to student loans, millennials are almost equally interested in charity than boomers and Gen X. They also demonstrate a higher interest in newer types of investments, such as marijuana and crypto, than they do with many more traditional investments.
For marketers interested in targeting millennials, there is huge opportunity to grow long-term relationships with this segment and to target them throughout various life stages. Smart marketers know that a shift in attitudes and behaviors is happening with younger investors and that these changes will likely reverberate with generations to come.
This article was written by Rupert Hodson, co-founder of Dianomi.