12th April 2024

Millennial clients require a different style of advice

Unlocking the potential of the millennial demographic in the UK presents a compelling opportunity for financial advisers.

The demographic landscape is shifting, with Millennials (those born between 1981 and 1996) emerging as a formidable force.

According to the Office for National Statistics there are 16.8mn in the UK, making up around 25 per cent of the UK population, and by 2025 they are poised to dominate the workforce, comprising a staggering 75 per cent. 

Following the UK recession in 2008, Millennials have forged new enterprises, fundamentally altering the career aspirations of an entire generation.

A growing number of Britons are embracing freelance work, with reports showing approximately one-sixth of the UK workforce is now self-employed.

This shift marks a significant departure from traditional employment patterns and represents the most substantial change in Western society in over a century.

Additionally, according to a report by the Resolution Foundation, over the next 30 years a significant intergenerational wealth transfer is on the horizon, with millennials poised to inherit a substantial £1.2tn from preceding generations.

All this data presents a huge opportunity and unique opening for financial advisers to manage assets and provide comprehensive wealth management services, setting the stage for enduring client relationships and sustained revenue streams.

Engaging millennials early in their financial journey lays the foundation for enduring client relationships.

As many millennials just turned 40, or are approaching 40 and navigating pivotal life stages such as homeownership, growing families, and retirement planning, they will increasingly seek ongoing financial guidance.

Building trust and rapport with this generation now can lead to lasting client relationships yielding substantial benefits for financial advisers, but to succeed in expanding this demographic, advisers must consider the distinctive needs of this generation.

Sustainable investing

In the UK, ethical and socially responsible investing continues to gain traction among millennials, they are in fact, the generation most likely to invest ethically, with 14 per cent having already been involved in ESG investing, according to a study from Finder.

With a heightened awareness of environmental and social issues, many Millennials are actively seeking investment opportunities that align with their values.

Financial advisers play a crucial role in introducing them to ethical investment options and sustainable funds, from renewable energy projects to socially responsible companies. 

According to a report from the House of Commons committee, ESG assets under management are projected to reach US$34tn (£27tn) by 2026, marking a significant rise from 14 per cent to 21 per cent of all Aum since 2021.

This presents a plethora of opportunities for advisers to help Millennials invest with purpose while also achieving financial growth.

Digital financial literacy

Millennials are synonymous with technological adeptness. According to a study by the Money and Pensions Service, 80 per cent of UK Millennials use mobile banking apps to manage their finances, highlighting their proficiency with digital tools.

Similarly, research from Finder UK found that 57 per cent of UK Millennials used budgeting apps to monitor their spending and manage their finances more effectively.

However, despite this digital fluency, many struggle with financial literacy. Financial advisers can leverage this digital proficiency by providing access to UK-specific financial apps and tools tailored to their needs.

From budgeting apps like Moneybox to investment platforms like Nutmeg, these digital resources can play a vital role in boosting financial literacy and empowering Millennials to make well-informed decisions about their finances.

Moreover, seamless digital communication is imperative for engaging Millennials effectively.

Financial advisers who embrace video conferencing, secure messaging apps, and online client portals facilitate remote engagements and enhance communication with millennial clients, thereby earning favourability.

Embracing technology enables advisers to meet UK Millennials where they are and deliver the convenient, accessible service they demand.

Successfully catering to this generation necessitates an understanding of their unique challenges and preferences.

Millennials expect user-friendly, intuitive technology, and any system that lacks seamlessness is deemed unacceptable.

Businesses that embrace new technology not only alleviate their own administrative burdens but can deliver exceptional service.

By doing so, they not only attract and retain younger advisers and clients but also future proof the advice business in the rapidly evolving financial landscape.

Financial wellness 

Millennials today face an array of financial challenges, including the impact of rising inflation, escalating university fees, and soaring interest rates.

According to the ONS, the average student loan debt in the UK stands at approximately £35,000, significantly affecting the financial well-being of many Millennials.

Historically, impulse purchases and indulgent spending often took precedence for Millennials, distinguishing their financial priorities from those of previous generations, but as they approach their 40s there is a shift in priorities.

In response to these complexities, financial advisers must tailor their approach by developing personalised financial wellness programs.

These programs should address Millennials' specific concerns, offering expert guidance on debt management, effective budgeting strategies, and the cultivation of long-term savings goals.

Moreover, advisers must acknowledge that Millennial clients require a different style of advice compared to previous generations. 

Fostering transparency and trust

In 2023, research from the Financial Services Compensation Scheme showed significant trends among UK Millennials and Gen-Z (those born between the mid 1990s and early 2010s) regarding their attitudes towards seeking financial advice.

Surprisingly, over half of UK Millennials (60 per cent) with financial products believed they could find reliable financial guidance online, while nearly half of Gen-Z (44 per cent) expressed confidence in sourcing such advice through social media platforms.

As investment scams, pension uncertainties, and cryptocurrency pitfalls escalate amid the ongoing cost-of-living crisis, the FSCS's findings underscored the pressing need for consumers to distinguish between regulated advice and guidance.

This clarity would empower individuals to make informed and responsible decisions regarding their finances, fostering greater confidence in seeking assistance.

Recent years have witnessed a gradual uptick in home ownership among Millennials, albeit at a delayed pace compared to previous generations.

While many are projected to become homeowners eventually, a significant portion are expected to remain lifelong renters.

Now is an opportune moment to emphasise the value of financial planning, helping individuals grasp its significance in achieving diverse goals, managing debt, planning for retirement, safeguarding legacies, and ensuring financial protection.

Financial advisers can cultivate trust among Millennials by adopting transparent pricing models, such as fee-only structures.

Through clear and upfront communication regarding fees and charges, advisers demonstrate their unwavering commitment to acting in the best interests of their clients, fostering trust and accountability.

Adapting for future growth

As the advice sector faces further challenges including fee pressure, rising insurance costs, and further layers of regulation, firms must embrace this generation to remain relevant.

Targeting Millennials represents a strategic imperative for UK financial advisers. 

By understanding their unique needs, embracing sustainable investing, leveraging digital solutions, and simplifying operating models, advisers can forge lasting connections with this burgeoning demographic.

Aligning with their preferences and values financial advisers can position themselves for sustained growth and relevance in an ever-changing market.

Sarah Paul is chief operating officer at Panacea Adviser

Read the article on FT Adviser

Business Development