Writing as a millennial, I can’t seem to get through a conversation with a fund/wealth/investment manager or adviser without the dreaded word cropping up.
So, what is the mystery?
With the season of industry summer drinks receptions in full flow, comments have centred around technology, financial apathy and a simple lack of cash.
Millennials only want to deal with technology. Trying to get millennials engaged with their finances is incredibly difficult. Millennials spend too much on avocados and cleaners and aren’t saving their money wisely.
That last one raised a few hackles.
Technology is as ubiquitous to us as cars were for baby boomers. Life without it is almost unimaginable. How did the previous generations cope?
But to assume that robo advice and other online offerings will tempt this elusive demographic to engage with advice is pretty naïve.
Keep it simple stupid
Without having done any sort of millennial-wide poll about why engagement levels around advice are so low – anecdotal evidence suggests that surviving today is prioritised over saving for tomorrow.
The high cost of living, coupled with relatively low wages, means that a lot of younger people feel that the small amount that can be saved now is not enough – so why bother?
It’s the “I’ll earn more later, so I’ll start saving then” mentality.
But with low wage growth and limited advancement opportunities, as older generations stay in the workplace longer and into retirement, this isn’t the wisest strategy.
The magic of compound annual growth is a message that really needs to hit home.
As does this basic, but important, rule of thumb around how much to save into a pension:
- Take your age when you start saving for retirement,
- Half it,
- Save at least that percentage for the rest of your working life.
For example, if you start saving at age 18, the percentage of your salary that should continue to be saved into your pension (including your employer’s contribution) is at least 9%.
If you can do it without your employer’s contribution, so much the better.
If you start at age 30 – you need to put in at least 15%.
A simple enough message – saving earlier and taking advantage of compound growth means that a lower proportion of your salary is eaten up later in life.
Getting the message out
So, how do you get a generation of people who don’t think they have enough money to start saving – to actually save?
Industry bodies are working to get more education in schools, but what about people who have already gone through the system without learning about compound annual growth rates, pension savings and investments?
You know, millennials.
Advisers have adopted various strategies for engaging younger clients. Some have upped their tech game, others run workshops, some IFAs work direct with companies to offer their services to employees.
The answer might just be to stop thinking of all people who ‘came of age around the year 2000’ as a single, homogenous group.
Rather than going after all millennials, perhaps advice and wealth management firms need to identify and target a key subset or industry.
Just some food for thought.
