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How could millennials disrupt the financial industry?

09/09/2019

By 2025, Millennials are expected to represent 75% of the global workforce* and therefore be tomorrow’s future investors. Financial firms are trying to target these young adults, mindful of their developing needs but they might need to reinvent their approach if they wish to appeal to this new generation.

While the digital revolution is indeed underway, another movement could disrupt the financial sector: the social evolution of new generations.

The X generation is now giving way to the Millennials, who are challenging and reinventing traditional definitions. From the digitalisation of exchanges to the importance of sustainable development, millennials often do not share the same mindset as their parents. 


But what will be the impact on the asset management world?

To understand why and how millennials might cause a revolution in terms of asset management, it is necessary to examine three key points.

Firstly, digital natives are motivated to invest first and foremost by their ability to have a real impact on society. They naturally seek to maximise the value of their investments, but they want to do so in a socially responsible and environmentally friendly way. This generation has clearly understood the promise of responsible investment. Its growing demand for this type of financial product opens new horizons for the asset managers of tomorrow. 

Another characteristic of the millennial population is their lack of trust in financial institutions. According to the Millennial Disruption Index, 71%2 would prefer to go to the dentist rather than listen to a bank’s advice. This indicator highlights the need for traditional banking and financial services organisations to reinvent themselves if they wish to stay relevant. If not, millennials will likely turn their attention towards new players such as the GAFAs (Google, Amazon, Facebook, Apple), BATX (China's GAFA equivalent, Beibu, Alibab, Tencent, Xiaomi) or other market players yet to emerge, such as the neo-banks.

The third point requiring asset managers to react is the expectation of millennials that services will be digitalised. Having grown up at the same time as new technologies, they expect the autonomy and the agility digital offers. ATADAWAC: “At Any Time, AnyWhere, Any Device, Any Content” is what this new generation is expecting to receive as a service Flexibility, autonomy and up to date digital solutions are key elements to meet millennials’ expectations.

 

New business models in asset management?

As we have seen, the asset management industry has no option but to adapt and listen to the voice of the new generation. The Innovation can be perceived from different angles:

  • Process Innovation: In the era of digitalisation, platforms such as robot advisory offer the customer experience that can attract a wide range of investors, especially the new generation.  It offers transparency, as well as a fully-digitalised solution across all devices.

  • Product Innovation: Products should be in line with investors’ values and expectations. Several players in the industry have already launched investment funds in the environmental, social and governance (ESG) field3. Some of them are already going beyond in order to further develop the impact.

  • Commercial Innovation: Social networks are used more and more to attract new generations and as a channel of communication.  Some platforms have already emerged using the social network at the epicentre of their strategy. Social network e Toro can be considered as the traditional example of new players, even if the company was born on the same time as the social network boom. The ability of copying the strategy of traders is definitely a new model in the wealth management more globally. The ability to trade crypto assets is also very attractive in the eyes of the new generation.

Asset management has no choice but to transform itself to survive.

We are still at the beginning of the journey, but it is necessary to adapt quickly to be equipped with relevant products and solutions when the new generation is ready to invest.

[*] https://www.ey.com/Publication/vwLUAssets/ey-the-future-of-work-is-changing-will-your-workforce-be-ready/$FILE/ey-the-future-of-work-is-changing-will-your-workforce-be-ready.pdf [1] https://www.bbva.com/wp-content/uploads/2015/08/millenials.pdf [é] https://academy.candriam.com/ 

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