The generation called Millennials will become the next wealth holders, and firms are looking into attract the younger generations into the world of wealth management.

As wealth starts to transfer from the Baby Boomers and Generation X to Millennials (aged 18-30), firms will have to look at increasing the numbers of Millennials in their ranks to attract the young wealth holders to work with their firms.

Millennials will be very influential to the financial world within the next few years, as they have already left their footprint on some segments of the sector including the increase in technology and impact investing. Millennial wealth holders will want to communicate to knowledgeable people on their wavelength, which may mean employing more among this age cohort as wealth managers. To illustrate what is at stake, according to data from CFP in the US, only 3.36 per cent of advisors are aged from 20 to 29; for those aged 30 to 39 years, the percentage is 18.38 per cent (source: ThinkAdvisor, Sept 28, 2015. It cited the CFP Board of Standards). There appears to be a potential crunch of more Millennials seeking financial advice as wealth is transferred, but a simultaneous ageing of the advisor population that can serve them. With consolidation in the wealth advisor space, encouraged by regulation, the talent crunch issue is seen as a problem on both sides of the Atlantic. 

To discuss such issues, WealthBriefing interviewed Stephanie Gopalakrisna, vice president, head of communications at BNY Mellon’s Pershing business for Europe, Middle East and Africa. 

“How to attract talent Millennial talent is something the industry is definitely looking into,” said Gopalakrisna. “There is no denying that there is an ageing base in terms of wealth advisors, and trying to attract Millennials as investors is a little bit more difficult when there is such a gap between the people they are looking to invest with, and the people that are giving them advice. It is something that the industry is recognising today.”

According to a study by PwC called Millennials at work Re-shaping the workplace in financial services, Millennials already form 25 per cent of the workforce in the US and account for over half of the population in India. By 2020, Millennials will account for 50 per cent of the global workforce.

Gopalakrisna, who is responsible for the marketing strategy at Pershing, continued: “Answering the question: what do Millennials want? It is easy and difficult at the same time. I have been interviewing Millennials, being one myself, and it is key that when we hire Millennials we have people interviewing them that project an image of dynamism and energy that they can relate to. Millennials I have interviewed are similar to Generation X and the Baby Boomers to some extent but they are different in terms of how savvy they are on some of the things that they know. They are so much more connected and aware. They have an idea of what we do; they have an idea of what they want. And you find yourself trying to convince the very good ones to join the company. I think capturing their interest by showing you are offering more than just a job is something that has been key in the recruitment process.” 

As reported by this publication several firms, including St James’s Place Wealth Management and UBS, have started to create academies to both advertise the sector to Millennials as well as train them to work for their companies. This is a bid to reach out to the generation which is reportedly represented in the media as hard to understand. In the US, Royal Bank of Canada brought in a raft of Millennials for internships, and they are due to set out a range of ideas for RBC in coming weeks. 

Pershing's Gopalakrisna also spoke about how the industry needs to improve to make sure it reaches out to get the best Millennial talent, which may mean more financial institutions starting up academies.

“One of the things that the wealth management industry has not been really good at and we need to collectively improve at is how early we start talking to people about what it means to have a career in wealth management,” said Gopalakrisna. “I know a few wealth managers have their own academies, where they can capture younger talent to develop and teach them in the industry, but more widely it is something we need to get better at. Partnering with universities or different schools to try and teach people of what it means to have a career in wealth management, the different options in the industry, is essential. It all starts with the industry educating Millennials.”

She added: “For example at Pershing, we have the reverse mentoring programme, where you have Millennials as the mentors of senior management personnel. And by doing this you get input from Millennials straight to management in terms of what they are looking for in their career, the company, and in terms of technology.”

Pershing is among a number of businesses that work with wealth managers wrestling with changes to their business models, such as providing them with outsourced functions. Others in the space include firms such as SEI, another US-headquartered business. In EMEA, Pershing has £55 billion ($72 billion) in assets under administration, 
 

Technology
There has been many studies done on Millennials, and nearly all have found that the generation are very technology-centric. A recent study by Legg Mason, the US investment house, found that Millennials across the globe want to plan their finances using a smartphone rather than through more traditional routes. WealthBriefing recently interviewed Michelle Pearce, chief investment officer and co-founder of Wealthify, who discussed technology in the financial world.

As Millennials demand for more technology to take care of their wealth, it begs the question: whether it is the end of traditional wealth managers and the personal touch? Gopalakrisna, who was previously responsible for marketing and communication at Equiduct, a European trading platform, disagrees and feels that a wealth advisor is still necessary to help provide guidance early on in an investors’ financial career. 

“Technology is just an enabler between companies and the Millennials,” said Gopalakrisna. "Companies need a good technology interface, because without technology you look like you are dated. However the personal touch is very important, you have to have the choice. I think one of the key things that we keep on coming back to is if you are trying to attract Millennials whether as an investor or as an employee, you need to make them confident that you are speaking the same language. They need to feel comfortable asking the advisor questions.” 

The head of marketing and communication added: “A Millennial investor may not know anything about savings or investment advice and they might feel a little bit unsure about going to a face to face interview to talk with someone who may know much more than them. A first introduction via a webchat or a talk may provide a light touch approach which brings them confidence. We talk about omni-channel because, it is not just about one thing, it’s about being able to move between channels from personal touch to online chat to another stage. Millennials are different in terms of channels. Technology is not going to revolutionise the financial industry, but it needs to give Millennials different channels to communicate because this is what they experience in their everyday life.”

Technological trends outside of the financial world have seen a rise in the use of social media over the past ten years. From Twitter to Facebook, the barrier of communication across the world has lowered, as many users today can talk to someone at any moment, anywhere on the planet at the touch of a button.

Some financial institutions have started to reach out to their clients through social media and applications on smartphones, such as BNP Paribas which became the first European bank to sign a global partnership with Snap Inc, the parent company of Snapchat. The Parisian lender has been investing its resources into strengthening its relationship with Millennials by enhancing its social networking platforms.

However Gopalakrisna, who is responsible for marketing and brand awareness at Pershing, feels that the financial world has not cracked the sector of financial social media and does not feel Millennials will actually connect with a firm on Twitter or Facebook.

“How does the financial industry use social media as a whole?” said Gopalakrisna. “This is a question I have not really answered myself.  It’s an important channel of communication, an important channel to actually to keep in touch with what happens but I don’t think we have cracked yet how we use social media to attract new investors. Millennials are very unlikely to actually follow a company which they don’t have any emotional connection to. It’s a tricky question and to be very honest, I am not really sure we have the answers yet.”

She also discussed the ways in which Pershing connects with Millenials via social networking websites.

“We do use social media, but we choose to do it on Twitter and LinkedIn to support some of the stories we push out around an event, and I think that makes sense,” said Gopalakrisna. “We don’t really use Facebook because I believe it is more private. I haven’t seen that many firms or banks using social media in a very ground-breaking way. There are some good initiatives here and there but it is mainly to support an event. Pershing does a four day event called INSITE, and we use social media there and it is good because it has a purpose. But using social media for the sake of it, I am a little bit hesitant.”