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The rise of affluent millennials How to stay relevant

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2 The rise of affluent millennials

The rise of affluent millennials: how to stay relevant is part of a series of digest publications from Efma, examining topics that are having a significant impact on the financial services industry. This Efma digest provides a collection of insights on how financial institutions should cater to a new generation of wealthy – the affluent millennials. It includes the latest research along with case studies that highlight related success stories, and observations from bankers and experts that work within this field.

Compiled by:

Anne-Laure Jozan, Head of content management APAC, Efma [email protected]

Images from www.istockphoto.com

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3

Vincent Bastid CEO, Efma

ForewordOver the next few years, a new generation is set to hold the majority of spending power and wealth in the world. Born between 1980 and 2000, the so-called millennials are currently the largest adult segment in our population and soon they will also be one of the wealthiest.

It’s a time of change for wealth management institutions, which have until now been used to serving a customer base with an entirely different set of needs and expectations. Affluent millennials are, generally speaking, technologically savvy, more cautious and less trusting of the financial services industry as a whole. They want more personalised services, more transparency, more control, and expect digital by default.

The good news is that the industry is beginning to respond, and the ones that are proving themselves capable of meeting affluent millennials’ needs are already reaping the rewards. They are changing their business models, developing new products and services, and exploring how they can collaborate with players outside of the industry to strengthen their value proposition.

In this Efma digest, we highlight some of the key ways in which financial services institutions can cater to the affluent millennial and set their business up to thrive in the future. Split into three parts, we look at what makes affluent millennials unique compared to their predecessors and what they expect from their financial services provider, some of the key challenges and threats traditional providers face, and what they can do to keep up. It is in this final part that we set out six recommendations for how financial services providers can tap into the affluent millennial mindset and win their custom, drawing insight from recent research and real-life success stories.

I hope you find this a valuable resource.

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Current state of play

PART ONE

Affluent millennials are set to reshape the future of the wealth management industry. They’re growing their wealth and they have a unique set of demands from their financial services provider compared to previous generations

The wealth management industry is shifting its sights to a new generation of wealth. As the baby boomers – those born between 1946 and 1965, and the industry’s largest current investor segment – enters retirement age, so enters a new cohort of investors and potential customers: the millennials.

According to an EY-CafeMutual report published in 2016, Winds of change: Wealth management reimagined, millennials – individuals born between 1980 and 2000 – are the largest and fastest growing adult segment across the globe and represent the greatest opportunity for the wealth management industry.

“Millennials are not only growing in number, but also accumulating assets at an impressive rate,” the report says. “In fact, millennials are entering their prime earnings years and also have the prospect of large inheritances. They have the potential to become the wealthiest generation in history.”

But unlike their parents and grandparents, millennials have different attitudes and approaches towards managing their wealth. If financial institutions are going to effectively cater to their demands, they may need to change their entire product and service delivery.

Who are affluent millennials?In 2015, millennials accounted for 40% of the global adult population and this continues to grow. Asia represents the largest proportion – home to nearly two-thirds of millennials.

In Millennials and wealth management: trends and challenges of the new clientele, Deloitte predicts that millennials will grow their wealth significantly over the next few years. “Until 2020, the aggregated net worth of global millennials is predicted to more than double compared to 2015, with estimates ranging from US$19 to 24 trillion.”

Millennials are classed as being affluent if they hold at least US$100,000 in investable assets,

excluding real estate. While many are still in the process of growing their wealth, a large proportion are about to enter their prime earning years. More than half also have intentions to start their own business, while just over a quarter are already self-employed.

Findings from a global survey conducted by LinkedIn and Ipsos in April 2015, shared in the report Winning Affluent Millennials: How this New Power Persona is Reshaping the Finance Industry, have found that millennials possess quite different behaviours compared to their predecessors – behaviours that will impact the way they engage with financial institutions. Generally speaking, they are eternal optimists, both about their own financial future and the financial industry’s; engaged decision makers; open minded; focused on social; and hungry for educational information.

They are also disciplined, eager to make sacrifices and set ambitious goals for their lives. “72% agree that the sacrifices they make now will pay off in the future, whereas only about half of all other groups surveyed agreed with this perspective,” adds the LinkedIn and Ipsos report.

In line with this, affluent millennials are active savers. “While affluent GenXers save a median of 18% of each paycheck, affluent millennials save a median of 24%,” says the LinkedIn and Ipsos report. “Furthermore, affluent millennials are almost three times as likely to save more than half of their paychecks each month. More than a third of them put the majority of each paycheck into savings, compared to just 12% of Affluent GenXers who do the same.”

It’s a global trend. “In Asia and Africa, two-thirds (67%) save towards their top priority every month – rising to 70% in Hong Kong, 74% in Singapore, 76% in Korea and 79% in Kenya – while 17% in India do so every week,” says the 2017 Standard Chartered report The Race to Save.


Overall, this population is confident in reaching its goals. The Standard Chartered survey of over 7,000 affluent consumers in Asia and Africa

shows that in two to five years, most hope to purchase a property. And almost all have plans to buy a property within ten years.

What you need to know about affluent millennialsWith their growing numbers and emerging preferences, millennials are a segment that cannot be ignored

Source: Goldman Sachs, Deloitte analysis, 2017

of the global adult population are under 35 years old40% of millennials are from Asia2/3

By 2020, the total net worth of millennials is expected to double and reach

US$19–24 trillion $

Their numbers... Their wealth...

of millennialsseek 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-mouthand personal

recommendation

Their habits...

84% 80% 57% 57% 40%

87%

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

87%

millennials expect to leave their current job

by 2020

27%

of millennials are

self-employed

Their career aspirations...

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The rise of affluent millennials How to stay relevant

June 2017

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the rise of affluent millennials - efma · 6 the rise of affluent millennials overall, this...

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