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Millennials are the new target audience for the wealth-management industry. They require special services compared to common practice, as they are typically ignored by the financial services industry. Nevertheless, the younger gen has more financial concerns than ever and need advice desperately. What features should companies provide millennials to solve their financial problems and win their loyalty?
While conducting interviews for WealthTech Club, we’ve gathered insights from both WealthTech experts and financial advisors. These stories are here to help you figure out what features millennials need the most.
David is a dentist who wants to open his own private clinic. However, his dream is too distant because of his massive college debt and mortgage, the latter of which he acquired recently as he bought a house so that he and his family would have a home and feel secure. On top of that, he bought a car on credit so that he could drive to work and back every day. Now he realizes he could have earned more if he and his family had moved to another city.
David turned to a financial advisor to make things clear and figure out what he needed to do to get out of debt. Several advisory firms rejected his appeal to become a client as his account was too small. David opened an account with Betterment, although it brought no immediate output. The advisor who finally agreed to help started asking him about his retirement expectations and his tolerance for risk. He turned to know little or nothing about debts and mortgages.
Debt restructuring capabilities might help David with his problems so that he can start saving for retirement. Such capabilities are a perfect candidate for automation. For instance, SoFi has already implemented this feature and helps people with personal and student loans, mortgages, etc. If the platform David uses implements debt restructuring, he will get a comprehensive plan for paying off his debts and starting a successful business.
Jim has just finished a technical university and wants to become an engineer. He doesn’t have enough investible assets right now, although he realizes the need to practice managing his own wealth. Among all the automated tools on the web, Jim likes mobile apps the most. He appreciates the ability to make investments as easily as buying things on Amazon. However, the problem with it is the fees. As a do-it-yourself investor, Jim makes transactions often to find optimal solutions through trial and error. For each transaction he pays a fee, which can sometimes be bigger than the profit gained. Jim has decided that investing isn’t very profitable, and as such has decided to stick to the simplest plan—yet this means he’ll never be able to see what other powerful opportunities the instrument might offer.
If a platform introduces plain, fixed-price fees monthly or annually, it would be far more affordable for people like Jim to find perfect the investment strategy. Robinhood, Oranj, and others have already implemented such flexible fee structures. Millennials are much more self-sufficient than previous generations, and are also fluent in using the tech. While levying only an annual fixed-price fee, Jim’s robo-advisor would give him free rein to exercise different approaches to managing his wealth.
Alex has always been adept at working, but never at finances. For him, what to do with money after it’s been earned is a conundrum. He knows he needs to save for retirement, and the firm at which he works provides him with a 401(k) plan, which makes him feel secure. Despite this, however, he knows nothing about financial goals and ways to achieve them.
When he started using a robo-advisory platform, he found he knows nothing about investment tools, capital markets, or his own financial life. Too many questions had to be answered for him to use the tool.
Robo-advisors are intended to provide support around all aspects of personal finance in addition to the asset piece. Millennials may still need a human touch, but they need explanations of what's happening to their money. They want to know what’s happening and why interest rates behave exactly this or that way, so platforms should educate them and help them navigate the emotional side. Many companies have already implemented understandable financial planning. Alex was happy to find educational materials within the platform he chose, as well as the ability to utilize a human advisor in case of concerns.
Emma has two children and wants to give them a bright future. She’s determined to ensure the financial wellness of the whole family, so she’s ready to pay the fees and practice a lot to achieve financial independence. She also likes the idea of making the world better through socially responsible investments. She found a platform that matches her needs and proceeded to register, but the process of opening the account turned out to be very obscure for an average user like Emma. Regulations, jargon, long application forms—Emma felt completely lost and there was no contact form to ask for help, so she decided to try again later.
Obviously, Emma needs guidance at every step of account creation. If the platform that managed to grab her attention had a simpler onboarding procedure, or at least the ability to reach out to a consultant through messaging, she’d have wasted no time in starting to trade using it. Companies such as Blueleaf and Wela allow real-time messaging with investors while shrinking costs involved in the human touch. When Emma decided to give robo advisors one more try, she chose a platform with rich impact investment options and went through all the onboarding steps easily with the remote advisor’s guidance.
Nowadays, misconceptions around millennials are slowing down the WeathTech industry. There are several key points to know about them to provide them with perfect features:
This knowledge can be used to build compliant robo-advisory platforms that are highly appreciated by next-gen clients.