Millennials and Financial Services

Contributed by: Rajni Dhameja, CFA

The Panel:

  • Navneet Munot, CFA, Chief Investment Officer, SBI Mutual Fund
  • Partha Iyengar, Co-Founder and Managing Partner, Life & Money
  • Amit Kumar, Partner and Director, The Boston Consulting Group
  • Kalpen Parekh, Joint President, DSP BlackRock AMC
  • Rajiv Sabharwal, Partner, True North  
  • The Moderator: Uday Dhoot, CFA, Founder,

Millennials seek life balance and they aspire to get the financial freedom at the earlier age. This coupled with their present focused mind, pose a challenge for the financial advisors. To achieve the financial freedom at an earlier stage of life, it is important to start saving early and invest for long term. But Millennials have low disposable income as they are in the initial stage of their career and their present focused mind gravitates them towards spending more rather than saving more.

Financial advisors have to tailor the presentation of the advice to leverage upon the behavioral traits of the millennials. The tendency to spend more is attributable to one core factor of convenience. Spending is convenient, but the investment is not. Today financial companies are talking among themselves rather than engaging in a meaningful conversation with the end investor. They talk in terms of numbers and jargons which make the investment process really complicated for the generation Y hence they get gravitated in the opposite direction.

To address this issue, financial services industry needs to engage in dialogue with Generation Y in a language which this generation can identify with. For instance, talking in terms of goals rather than in returns. For instance, to enjoy an exotic vacation after four years, you need to invest so much amount in so and so asset. Further, rather than giving them advice, the financial planner should act as a choice architect. For instance, to achieve the financial freedom, these many combinations of asset allocation are available. Each presented with relative merits and demerits. Such an approach leaves a satisfaction in their mind that they made the informed decision as they tend to listen less to others.

The purpose orientation of Generation Y should be brought about in the financial advice. For instance, an ESG compliant portfolio contributes to the larger good over and above achieving the financial advice. The investment process needs to be made easier the way spending has been made easier with few clicks on the phone. It will help to bring about the change in their habit of low investing. The question for financial services industry is how to manage the small margins of advisory fees with the investor class who otherwise is habitual of free offers and services in their spending habits.


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