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
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
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.
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