17 July 2019

Millennials Consult Parents Over Finances

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Researchers from Oxford and BNY Mellon found Millennials in developed economies are twice as likely to turn to parents for financial advice as they are to turn to banks or other financial services providers, including retirement specialist advisers. Further, according to “The Generation Game: Savings For The New Millennial,” nearly six in 10 Millennials (59%) say financial services products are not targeted at them, and less than one in 100 want providers to contact them via social media channels.

Researchers use these figures to suggest there is a troubling communication gap between financial services providers and the youngest generation of investors. What’s worse is that financial services providers—from life insurers and banks to asset managers and workplace financial advice providers—are failing to connect with Millennials at a time when young people need the industry more than ever.

For instance, Millennials face both increased longevity and the erosion of state and employer retirement provisions, researchers observe. This means they will have to save and invest more aggressively than their parents, and must do so over a longer period.  

According to the study, Millennials lack key knowledge about even basic retirement planning concepts. The study reveals that pensions need to be better explained to Millennials, for example, because nearly half (49%) agreed that they did not know how pensions work.

Shayantan Rahman, an Oxford student studying economics and management at the Saïd Business School who was involved in the study, points to findings that show Millennials are generally comfortable about receiving product information through social media, but they do not want financial services providers using these channels to contact them for a two-way conversation.

Given this difficulty in making contact with Millennials, how can financial services providers rise to the challenges that the youngest generation of workers face in creating a financially secure future? Some solutions are shared in the BNY/Oxford report.

In the short-term, given Millennials’ reluctance to seek advice from professional sources, firms need to find avenues to better equip parents and other trusted parties to advise their children. Researchers suggests providers can use traditional media to present tools to educate parents on the retirement savings gap Millennials will likely face. The same indirect pathway should be used to communicate the benefits of wealth compounding and tax efficiencies within qualified workplace retirement plans.

In the long-term, researchers urge financial services providers to work with policymakers to move away from a single purpose tax-incentive retirement pot toward a tax-incentivized savings pot that allows for more flexible and effective lifetime drawdowns. This will allow firms to capitalize on Millennials’ need to feel a sense of reward for their savings efforts, in the form of tax-incentivized and compounding returns, while also granting their desire for wealth accessibility in a more volatile economic environment.

Click here to access the full article on PlanAdviser.

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