A few months ago I attended an annual client meeting along with a number of leaders from across our organization. There weren’t any surprises in our state of the industry discussion; shifts in distribution, growing market share of passive strategies, diversification through alternatives (and need for education), the regulatory compliance buzz of the moment, and my personal favorite – millennials. As the conversation turned to this confounding generation that shares too much online, listens to numbing electronic dance music, and would rather take an Uber than own a car – the gazes in the room peered in my direction, looking for validation and feedback on their attributions. (Un)fortunately for me that day I quickly became the authority on the topic as the only card carrying member of the 18-34 year old millennial generation in the room.
That scene has played out countless times over the past six months, so it was no surprise to hear “millennial” as one of the most obsessed over buzzwords at this month’s ICI conference. Generation X and the Baby Boomers seem to stare in awe of this generation and the opportunity to access their hearts and minds before the millennials can fully do it on their own.
Millennials are subject to examination by fundsters from all walks – product development, marketing, distribution advice and service. Each area must think about how millennial preferences will impact their business and how to take advantage of that change. The biggest fundamental challenge facing the industry is they really don’t have any money yet making the ROI case difficult. However, this 70 million deep cohort stands to inherit $1Trillion annually over the next 10-15 years (Jenny Johnson, Franklin Templeton Investments) – in other words, the largest transfer of wealth in the history of the U.S. Eventually they’ll earn on their own too. In fact, at the ICI conference, Indra Nooyi of Pepsi certainly highlighted the desire to move high performing millennials into the positions currently cemented by Gen X’ers. This class is rising by virtue of their curiosity, persistence, ambition – and with a dash of manifest destiny, they are becoming the most key demographic for the industry.
The behavior exhibited by millennials is quite different. Having weathered two economic crashes (and two last second Patriot super bowl losses to college roommates from New York), they are much more sensitive to costs and more risk averse in their finances (than they may be on Tinder). They also prefer technology as a primary means of interaction, allowing them to conduct the research, execute the strategies and take the credit (preferably not the blame) on their own. In a 2014 Wells Fargo study, 77% of millennials indicated that they had the financial knowledge to address any financial problem over the next ten years – perhaps coming from overconfidence (a result of the participation trophy), or delusion (Entourage episodes), or Google (Search: how do I…). Despite supplying TMI on their 6-10 social media outlets, this generation will be cyber super sensitive to the information they don’t want public, like their iPhone photo library and finances I suspect (though tools to manage them will grow more robust and ubiquitous, i.e. OpenFolio, Mint, etc.).
Millennials will bring significant changes to our client’s businesses and both directly and indirectly to our business model as a transfer agent shareholder service and recordkeeping provider. Not much mail is coming in these days from millennials (where do you buy stamps?). The fund industry needs to continue to shift their business model to adapt to these coming changes, hopefully they ask the millennials and begin to transform their strategies before the millennials take their seat – or worse, their market share (hello Wealthfront, Betterment, LearnVest, Acorns, Robinhood, etc.). Until then, at least some rooms will (hopefully) have a voice of from the generation in it.