By Max Ottignon, co-founder, branding agency Ragged Edge
Hear the words Generation Y or Z and an image of a young person who perceives financial planning services as having little or no relevance to them springs to mind. Someone living under the long shadow of student debt. Someone in a perma-rental situation with little chance of stepping onto the property ladder. Someone with no savings. Interested only in the here and now, in flat whites, not flat deposits.
It that’s more than little unfair. While many in this age bracket are delaying life milestones like marriage, home-ownership and parenthood – either because of shifting societal expectations or finances – many still ultimately aspire to start a family, buy a house and settle down (according to Pew Research, 75 per cent of Millennials want to get hitched).
But the traditional financial services, and the way they’re presented, aren’t resonating. (The Financial Conduct Authority reported that only six per cent of 18-34-year-olds took financial advice in 2017. And a separate study by Schroders found that, in the same year, more than half of all IFAs turned away people with less than £50,000 to invest.)
So why is there such a gap between IFAs and people born after 1980? If we really want to find out why Gen Y and Z aren’t engaging with traditional financial services, perhaps we need to look at what we’re offering and how. After all, these people will represent 75% of the global workforce come 2025.
Apps, not suits
We’re talking about a group of people that rarely sets foot inside a high-street bank, and which accesses banking services digitally – when, where and how it suits them. IFAs, rightly or wrongly, are perceived as belonging to a bygone era, one where a middle-aged man in a suit sits on the other side of a desk, assessing whether you pass muster and then pushing expensive products (if they’re prepared to meet you at all).
Gen Y and Z look to digital tools to solve all of life’s problems. So, this post-Boomer generation of banking customer needs innovative financial services that empower them to reach their goals. Digital solutions need to be intuitive, streamlined, uncomplicated. In this landscape, traditional IFAs can seem problematic, routes to success filled with obstacles, processes time-consuming and intimidating.
Of course, Gen Y and Z face different challenges than their parents did (student debt, wages that haven’t kept up with inflation, steep salary-to-house-price ratios), but IFAs would do well to focus on Gen Y and Z potential and learn how to communicate effectively. They are the future, after all.
From net worth to self-worth
We are starting to see some new products hit the market that are aiming to reach the millions of people who feel priced out of financial advice. For example, the UK’s first FCA-approved automated financial advisory app, Multiply, launched recently offering free expert advice, with messaging that challenges people to live up to their financial potential and invest in themselves. It feels very different, reframing financial planning from net worth to self-worth, with a rallying cry for people to invest in themselves.
The focus is less about financial wealth, more financial health. We know younger generations don’t enjoy the same financial security as Baby Boomers, and need more guidance in their long-term planning. Yet their lack of savings severely limits the financial services they have access to. It’s a vicious circle, and it’s no wonder that younger people disengage from planning for their future.
This is a new approach that seeks to change the relationship that people have with their finances, encouraging them to use technology to engage and stop hiding from their finances, and then reach their full potential.
AI versus the personal touch
It’s not an AI versus face-to-face issue – middle-aged men in suits and chatbots can work together (interestingly, MyEva, a digital advice app created by FCA-approved Wealth Wizards, uses a female chatbot to address this imbalance). It’s about accessibility, relevance and potential.
For many people, ISAs, pensions, investments and mortgages, etc, remain baffling and unknown. Tech-enabled services can direct people, simplifying processes and making them better. It’s not a product problem, it’s an advice problem. Anything that gets the message across in an accessible, unintimidating way to more people has got to be a great step forward.
Richer people with broad, complex portfolios will still look for the services of a real-life financial planner. But for younger generations with simpler needs, emerging digital tools can educate and reassure, and provide a more natural road into the financial planning world.