Wealth management for Millennials: Are firms missing out on a massive opportunity?

Wealth management for Millennials: Are firms missing out on a massive opportunity?

When talking about millennials, it is easy to think they are still quite young; however, some of those in the generation are already in their 40s. This is the perfect age for wealth managers to be onboarding them as clients, but have some firms missed the boat?

A huge portion of millennials have already started engaging with investments. Whether that is through traditional wealth management providers or through the burgeoning WealthTech sector, which has made accessing investments quick and simple. A report from B2B research firm Clutch claimed that 88% of millennials currently invest their money. However, many expressed uncertainties with their investments, as only 55% of them said they are confident in their money management skills.

While it might be too late to reach the whole generation, there is still a massive opportunity for those yet to start building a portfolio.

A report from HSBC UK found that 57% of non-investing customers were unlikely to invest in the next 12 months for fear of losing money. However, 57% of those aged between 18 and 35 years’ old said they were either likely or extremely likely to invest during this time period. This is significantly higher than those aged over 56, with just 16% expecting to invest in the next 12 months.

Millennials have a clear appetite for investing and are more willing to take a risk. We’re in a tough financial market and the cost-of-living crisis is putting a lot of pressure on people. HSBC recently asked 452 of its wealth customers their main motivation and 40% said they wanted to do more with their money they had. Given the investing appetite from millennials, there could be a big opportunity for wealth firms to capitalise on.

HSBC UK’s head of transactional wealth and insurance Felicity Sherman said, “YouGov research from earlier this month exploring how customers are fighting back against the cost-of-living crisis found a similar appetite for saving and investing among those within the millennial age bracket.  Of those aged 18-44, over half (54%) had at least £501-£5,000 in either investments, ISAs, or premium bonds.

“The broad digitalisation of investing is a key enabler for younger investors, with access to investing platforms widely available through apps and mobile devices. This will be further fuelled by investing becoming increasingly accessible at a lower entry point.  Two-thirds of our wealth customer base are now choosing to invest through our mobile investment platform, and almost seven in 10 of those who opened an investment account last year started with an investment of less than £100.”

Boosting engagement

Coupled with the rise of digital investment platforms making investing simple and easy to access, social media has encouraged younger generations to get involved. A survey from Finder claimed that half of investors in the UK are now getting their investment advice from social media platforms. The most popular platform was YouTube, with 21% of investors using it to get investment advice. This was followed by Facebook at 16% and Instagram at 15%. TikTok, Snapchat and Reddit have also become sources of information for people.

However, while people might be getting advice from social media and finance influencers, this doesn’t mean they are engaging with investing services, potentially due to being overwhelmed. Tamara Kostova – CEO at investing platform as a service provider Velexa – said, “There is an interesting paradox here– while young people are getting more exposure to financial literacy and access earlier, they may not be taking necessary actions because of the overwhelming number of options available to them. Therefore, financial institutions and FinTechs still need to take action steps to build trust and increase healthy financial decisions.”

There is a clear opportunity for wealth firms to capitalise on the millennial investing market, but how can they boost their engagement with the group? Kostova said they first need to understand the personal challenges investing could help millennials resolve.

“At one’s forties, people tend to evaluate “what have I accomplished, have I reached my goals?”. Many would find they are not where they would like to be in terms of financial stability and support for their future, including the retirement planning. With proper explanation of goal-based investing strategies, firms can form a long-term engagement with their clientele.”

The good news is that technology can make this relatively simple to implement. Most of the consultancy and educational functions could be automated. On top of this, the advancements of generative AI tools, like ChatGPT, could automate chatbots to allow millennials to ask questions and get informative answers without needing to speak to a human. Kostova noted that the key to supporting the millennial market is to show them the outcomes of what they could achieve if they started investing today and when they would reach certain goals.

HSBC UK’s Sherman also believes that educating millennials about investing is at the heart of boosting engagement.

Sherman said, “It’s important that we better educate people on investments, and at an early age, so that understanding of the basic principles of investing isn’t a barrier.  And for those who are holding back from investing based on their level of knowledge, it’s worth noting that there is the option to invest in a fund, which can help manage risk. A steadily increasing number of people are choosing to use the bank’s mobile banking app to invest from £50 in a selection of ten ready-made HSBC global strategy funds with different risk ratings.

“The evolution and integration of investing and digital is powerful and exciting, benefiting young and novice investors, broader society as well as the firms who do it right.”

HSBC is leading by example. It recently launched its new Wealth Dashboard feature on its mobile app. The new tool allows customers to see all the funds they hold, the total value of their portfolio and the performance of each fund. On top of this, it allows users to easily invest, sell and establish regular investments.

Aside from education, Stratiphy founder Dan Gold emphasised a need to make experiences as streamlined as possible. Millennials have grown up with technology, this has embedded an expectation that user experiences must be simple and streamlined. If a firm wants to attract the millennial market, then they need a user-friendly platform that gives them real value and also lets them interact with others in a similar way to a social media platform, letting them engage with a community, share ideas and learn.

“The traditional approach of picking up the phone and dealing with automated messages or robotic voices is not appealing to them. Instead, they prefer firms that are easily reachable for support, often through live chat.”

On top of this, Gold stated that firms need to portray an image that is friendly and approachable to ensure millennials feel comfortable and engaged.

Capturing the Gen Z market

With the boat already sailing on the millennial market, it might be time for firms to start looking at how they could capture the Gen Z market. But what lessons could they learn from the millennial market to ensure they can capture the next generation.

Kostova said, “Because Gen Z has a deeper trust in the technology, wealth managers need to position themselves as enablers and tech solution providers, as opposed to advisors. There is a level of independence that Gen Z values, so the wealth management industry needs to adapt to being more educational but also more hands-off.”

Gold also offered some advice to firms. He stated firms need to recognise that conventional advertising methods are not effective with the Gen Z audience. Instead, they need to build entertaining and educational content. This then needs to be put in channels they are using, such as social media.

“Platforms like TikTok offer a prime opportunity for firms to connect here, and by engaging with the audience’s existing content consumption, businesses can foster trust and establish a formidable presence with this demographic. Once again, to effectively capture attention and cultivate enduring relationships with younger audiences, companies must be willing to adapt to their preferences.”

API-based technology is allowing companies to seamlessly tie services together. Embedded payments and lending services have become a common sight. Most online transactions nowadays allow users to easily pay through PayPal or to take out a loan through a buy now pay later provider like Klarna. These services have made online transactions a streamlined and hassle-free process. However, Kostova believes embedded wealth has a “huge untapped potential.”

She added, “The latest technology allows us to seamlessly integrate investing products into everyday apps and consumer experiences to an extent where they align with one’s personal goals. As an example, imagine effortlessly saving for your dream vacation by adding a predefined amount of money to your investing account each time you shop at your favourite retail store.”

If firms want to be successful with younger generations, technology is vital.

Gold concluded, “Technology is key to reaching younger generations like Gen Z and Millennials. These demographics spend most of their time online, so if you want to connect with them, you need to embrace technology and leverage platforms like smartphones and social media. The rise of Fintech and finance influencers showcases this approach in action. Now, it’s time for businesses in the space to follow suit and to build their own loyal and engaged audiences.”

Enjoying the stories?

Subscribe to our daily FinTech newsletter and get the latest industry news & research


The following investor(s) were tagged in this article.