InFocus: Bridging the millennial divide

Nathan Jacobsen easton investments capgemini EY David Currie Wealthy Self Ulton Jes Wilkinson

6 August 2021
| By Laura Dew |
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As costs rise for financial advice and more advisers choose to exit the industry, this is leaving the millennial generation without a viable option for advice. 

This is despite the generation being likely to receive the largest intergenerational wealth transfer in history from baby boomers in the future.

Speaking to a Senate committee last month, Nathan Jacobsen, managing director of Easton Investments, said he could foresee a market of three million households seeking advice in the next five years. However, the number of advisers would have fallen to 15,000 over the same period. 

This would leave consumers at the mercy of general advice or robo-advice as they were unable to afford the $3,000 or $5,000 advice fee nor meet the required level of assets for a percentage fee.

While this would surely present an opportunity for advisers, research by Capgemini found the majority of wealth managers reported they felt uncomfortable working with the younger generation.  

“It is essential for wealth management firms to train and re-skill current staff to service new client profiles and adapt to new service delivery channels,” its 2021 World Wealth Report stated.

“Only 38% of wealth managers say they are confident in their ability to understand the unique needs of millennials and engage with them effectively.”
So, what do millennials want from an adviser?

With established advisers used to having a sit-down chat in their office with their clients, it would require a substantial change of practice for them to meet millennial’s technology-focused demands. 

A wealth management study by EY found 78% of millennial clients planned to use more digital tools as a result of COVID-19 and 78% said the use of them had improved their decision-making. 

Some 43% wanted to use a digital platform and an adviser equally, compared to 29% of respondents in the ‘boomer’ category and 33% wanted to ‘mainly’ use a digital platform.

They were also more willing to pay for ‘experience features’ such as reliable digital services, more contact with the adviser, financial education and a consolidated view of all their financial products. 

David Currie, financial adviser at Wealthy Self, who had set up a business aimed at offering advice to millennials said he was “not surprised” that traditional advisers found it difficult to work with younger generations, mainly because of costs. 

In order to make his business cost-effective, Currie offered a flat fee based on an hourly rate rather than a percentage fee and a remote service over Zoom rather than face-to-face.

“There is a significant transfer of wealth between the generations but then young people don’t necessarily want to use their parents’ adviser as they don’t relate to them so it is a challenge.”

Jes Wilkinson, wealth manager at Ulton, said: “Older advisers need to connect with millennials with enhanced technology and take care not to come across as ‘parental’. 

“Millennials have grown up in an environment of 24/7 access to information and, as a result, a service offering access to topical information through an ‘on-demand system’ can be an attractive option.

“Consider stepping stone advice by starting with insurance advice to protect their wealth accumulation, general education with wills and estate planning then move to budgeting via a tech-savvy application and lead into more comprehensive advice as affordability is more apparent.”  

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