Steve Andrews considers the much-misunderstood millennial generation's need for financial advice - digging underneath the headlines to gauge whether five common assumptions are fact or fiction
Millennials somehow pull off the feat of simultaneously being seen as the most entitled and yet the most financially squeezed generation ever. Nevertheless, they are set to receive an inheritance boom bigger than any other post-war generation. Millennials will one day become the richest generation, and they will need stringent advice on what to do with their wealth - not to mention how to keep afloat until they reach that point.
So who or what is a millennial? Are they really all bearded hipsters who drink lattes from avocados and the reason we are no longer served food on regular plates? If you are confused about what it means to be a millennial, you are not alone. The term is loosely defined but the definition most people agree on is someone born between 1980 and 1996. Even so, this lumps together someone as young as 21 with someone soon to turn 40, which, if we are being honest, makes a world of difference.
To illustrate the point, Vodafone only launched text messaging in the UK in 1994 when our oldest millennials were 16 - and the youngest not yet born. The oldest millennials meanwhile are the first generation to have paid tuition fees to study at university yet these were capped at £1,000 a year - students today face annual fees of £9,000.
All things considered, a one-size-fits-all approach to millennials is impractical to say the least and so, to gain a better understanding of this generation, let's go beyond the headlines and consider the actual data.
True or false? Millennials spend a lot of their time using smartphones
As of 2015, there were 125 mobile phone subscriptions for every 100 people in the UK - yes, phones now outnumber citizens. According to Finder.com, millennials are more likely to use their phone throughout the day. Three-quarters (77.4%) of millennials check their phone after dark, compared with only a fifth (19.8%) of baby-boomers. After going to bed, almost half (46.1%) of millennials continue to check for text messages - almost double the proportion of baby-boomers.
In fact, age emerged as the defining factor in relation to time spent scrolling on a smartphone. Millennials topped every single category, with Gen X following behind and baby-boomers coming in last. Incidentally, a survey by Ipsos found ‘tech-savvy' to be the most popular word associated with millennials.
True or false? Millennials have no money - that is why they can't save
In a recent report produced by the Resolution Foundation, millennials in the UK emerged as the second worst-hit financially. The pay squeeze for the under-30s was worse in the UK than anywhere else apart from Greece. In Britain, though, the pay squeeze was twice as bad as that on those in their 50s - this was the biggest age divide.
Ipsos has also identified stark differences between generations in relation to the amount of disposable income they possess. While people aged 25 to 29 have seen their disposable income shrink 2% below the national average, those aged 70 to 74 have seen it grow by a whopping 66% - the greatest amount of any country surveyed.
True or false? Millennials only do short-term impulse-spending
Another Ipsos survey found concerns about housing are most pronounced in the UK, where some three-quarters (77%) of young people say they are less able to buy a home than their parents were. A Finder.com study showed 95.1% of millennials admit to impulse-shopping, and nearly one in five to impulse-shopping every day - which is probably linked to the proliferation of small metro supermarkets rather than large hypermarkets.
At the same time, half (49.5%) of millennials reported feeling regret after purchasing items, while only 18% of baby-boomers did. And while millennials confessed to spending an average of £328.05 on impulse, baby-boomers' average was less than half that - £125.97.
Verdict: True. Millennials are impulse-buying far more frequently and at much higher cost than baby-boomers.
True or false? Millennials do not need - or even want - financial advice
Young people are liable to misinterpret information. When, for example, the Financial Times researched the Lifetime ISA - the tax-free wrapper aimed at those aged under 40 and providing a state-funded 25% top-up on savings for buying property or retirement - it found that, despite best efforts, young people were confused by what this meant.
Almost 50% of those asked thought, incorrectly, that the LISA meant more generous tax wrappers than corporate pensions - which offer up to 45% tax relief and include employer contributions.
In a survey published by Deloitte, meanwhile, 50% of 18 to 24-year olds said they would pay for robo-advice - 16% higher than the average. While they are willing to pay for it, however, they are unwilling to pay much. Almost three-quarters (72%) of respondents said they would not spend £125 or more - a 75% discount on the typical cost of advice.
Deloitte suggests following a structure like that of music-streaming services - offer a free service and upsell a premium one. Bear in mind free guidance is unregulated and therefore does not carry compliance costs and can build customer loyalty before the opportunity to upsell more complex services later.
Millennials are, after all, the age group where loyalty and a long-term relationship will be most lucrative. Again, people born between 1982 and 2002 are set to receive a bigger inheritance boom than any other post-war generation.
Verdict: False. Not only do millennials need advice but they are willing to pay for it - it is just about tailoring costs so it becomes another reasonable pay-as-you-use service.
True or false? Millennials shy away from face-to-face communication - now it's all online
Furnley House managing director Stefan Fora has published research showing people aged under 35 value face-to-face communication as much as over-35s. Even more surprising was that telephone and video advice proved equally unpopular within the two groups.
Verdict: False. Although millennials are the biggest consumers of technology they still need face-to-face reassurance.
All this suggests that, where millennials are struggling to think long-term about their finances, advisers need to understand and think long-term about younger clients. The modern adviser needs to consider how they can deliver value over a long time and build client loyalty and trust rather than focusing too much on delivering big returns.
To attract these digital natives, it is clear advisers need to use digital communications tools. Cash modellers that can account for niggling debt and atypical employment (both of which are increasingly common among millennials), avatars and infographics to engage clients, for whom sums and graphs will not paint a full picture - these are all important examples of tech that can make a difference when engaging millennials in financial advice.
Steve Andrews is head of managed services at adviser software provider Focus Solutions
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Entitled, squeezed or both?
In her second of two articles, Ruth Gilbert argues a combined industry effort would improve pay-out times for life cover claimants