Financial Services: The Millennial Factor

Elenna and Jason VanMeter in happier times. photo courtesy of Elenna VanMeter.

Millennials, those born in the 1980’s and ’90s, have become America’s largest generation, passing the baby boomers. The oldest millennials are entering their peak earning years, buying homes and making investment decisions.

As they do so, they are reshaping the financial services industry with tools and preferences that  are unlike earlier generations.

Last year, there were an estimated 79.8 million millennials (ages 18 to 35) compared with 74.1 million baby boomers (ages 52 to 70), according to the Pew Research Center. The millennial population is expected to continue growing until 2036 as a result of immigration.

They are the first generation of digital natives, those who came of age since the advent of the Internet.

“Millennials, and at age 32, I am one, are more tech savvy and prefer a streamlined process” said Keith Renno, a senior loan originator with WinTrust Mortgage in Valencia. He noted that millennials now make up half the home-buying market.

After 12 years in the mortgage business, Renno has observed how each generation approaches the home-financing process, and there are differences.

“Millennials prefer to use automation and online tools to reduce time needed to go through process like buying a home,” Renno said. “So much can be done on their phone or tablet that they often don’t see the value of meeting one on one. So they’re less likely to want to meet in person than older generations, who tend to want to build a relationship.” As a result, Renno said that millennials are less likely to refer friends to the firm.

Millennials are more transaction-oriented and they want information quickly, Renno said. “They’ll shop around online, they want data and time to process the numbers. Then they make a decision.”

Just as patients bring information they’ve gathered online to their doctors, so do Renno’s clients, and not all of it is accurate. “People bring in all kinds of online due diligence, and while sometimes they have correct information, they also can bring in outdated or incorrect information, and we have to explain some things.”

As with any generational cohort, millennials are not a monolith, and “it would be a mistake for financial marketers to treat millennials as a homogeneous group,” said Dan Simon, co-founder and CEO of Vested, a financial communications firm in New York that recently surveyed millennials about their attitudes toward money and investing (see sidebar, page 9).

Vested’s survey found that millennials between 18 and 22 years old said the Great Recession did not have much of an impact on them, while those at the other end of the age bracket very greatly felt, and continue to feel, negative impact.

Millennials were just entering adulthood during the recession that started in 2008, which contributes to a more conservative approach to investing than earlier generations. Nearly two thirds of U.S. investors say their decisions are still influenced by the global financial crisis of 2007–8, according to the 2017 Legg Mason Global Investment Survey of 15,300 investors in 17 countries across Europe, Asia Pacific, Latin America and the United States.

The impact was felt most severely among millennials; almost 6 in 10, 57 percent, say it ‘strongly’ impacts their investment decisions, compared with 39 percent of members of Generation X and only 13 percent of baby boomers.

Given the scale of economic carnage that many young investors witnessed firsthand in their own lives and those of their families – and the degree to which attitudes are shaped in late adolescence and early adulthood, the fact that millennials describe themselves as more conservative about risk (85% described themselves as either “somewhat or very conservative”) isn’t surprising, according to Legg Mason.

But an unwillingness to take risk in early adulthood could have a negative impact on their future wealth by sacrificing the potential for long-term gains, compounded over time.

Millennials share a handicap with members of Generation X, and that’s a lack of financial literacy, according to Erick Arndt, a wealth advisor with LPL Financial in Santa Clarita. “We’re still not teaching financial concepts” in our schools, and it’s having an impact.

“Our corporate clients bring us in once they have a 401K, and we sit down with each employee. But we don’t have enough time in our one-one-one meetings to teach the basics of financial literacy,” he said.

When baby boomers were in their 20s, they weren’t being bombarded with marketing the way millennials are today, Arndt said. “They’re being targeted constantly, and they fall prey to spending beyond their means.”

Arndt, 46, recalled sharing an inexpensive landline with roommates in his early 20s. Today, “everyone has a cell phone, maybe a couple of other devices, an insurance plan on those devices. Add college debt to that burden, and the cost of a car payment, plus insurance plus gas. Every dollar of their paycheck is spoken for before they can cash it.”

Being stretched financially is affecting how and where millennials live. While one in four (27 percent) of younger millennials (ages 21-27) and more than half (56 percent) of older millennials (ages 28-34) are home owners, young adults are more likely to be living in their parents’ home than in any other living arrangement, according to the Pew Research Center, a nonpartisan think tank in Washington. This is the case for first time in more than 130 years.

Another shift in millennials’ approach to investing is a greater emphasis on impact investing, designed to achieve measurable social or environmental goals along with a return on investment. Since millennials are in line to inherit trillions of dollars from their parents and grandparents, this could transform charitable giving.

Overall, 45 percent of all high-net-worth investors either own impact investments or are interested in adding them to their portfolios, according to research by U.S. Trust. Millennials show the greatest interest in investing for impact, at 52 percent, compared to Gen X at 37 percent and baby boomers at 29 percent.

Among those who expressed an interest in impact investing, more than half (55 percent) said it was because they simply believe it’s the right thing to do, U.S. Trust found. Nearly as many said they believe in greater corporate accountability, while four in ten said that companies that have a positive social impact also have better financial performance.

Millennials and money survey: key findings

Vested, a financial communications firm, surveyed 401 millennials across the country about their use of and attitudes toward financial services products and institutions. Here are some highlights:

  • Millennials aren’t a monolith. When possible, parse for age segments, recognizing that 30–35’s are vastly different from 20–24’s.
  • Millennials between 18 and 22 years old say the Great Recession did not impact them, while those at the other end of the age bracket very greatly felt, and continue to feel, negative impact.
  • Debit cards are used by 38% of respondents. Debit card usage falls with age and wage. Significantly fewer men use debit than women: 26% vs. 44%.
  • Overall, credit cards are favored by 34% of respondents. The popularity of credit is inverse to that of debit. Credit cards usage grows with age and income.
  • PayPal is surprisingly strong, used by 19% of respondents. Those who favor PayPal skews younger (20–24) more affluent, and male.
  • Bitcoin is still a niche. Only 17 percent of millennials use the digital currency, and this use is fairly consistent among all sub-sections of the sample.
  • Female millennials are significantly less likely to take a credit card than their male counterparts.
  • Having a high income, being male, and living in a city are predictive of high levels of interest in cloud banking, or banks without physical branches.
  • The millennial generation — despite being digital natives — wants and prefers in-person customer service. To capture those who aren’t currently open to online banking, it’s important to create an online customer experience that responds to their needs, be it with conventional call centers or bots.
  • The cultural and political volatility of this moment does have an impact on financial decision making, especially when we look at women and the affluent. These groups need assurances that their savings and investments are secure.
  • Millennials care about data safety but not about data privacy. At 32%, data safety is the #1 reason millennials gave for choosing a banking product. While data privacy is generally twinned with data safety, in this survey, privacy came in last as a rationale, at 8%.
  • One in five millennials at the $100K+ income level are so far staying out of the market, and have yet to choose investment vehicles or retirement products.
  • Financial products shouldn’t always be marketed uniformly. Women, for example, aren’t as attracted to widgets or services described as “innovative.” Far more skeptical than men, they want to see the benefit.
  • The affluent, men, and older millennials are greatly influenced by their social networks.
  • Rewards and perks matter when persuading users to try innovative banking products. The vast majority of millennials, 88 percent, would adopt more financial products if those products offer more incentive programs.
  • Millennials’ trust in banks in dramatically low. They trust governments and the press more than they trust banks.
  • Respondents place greater trust in big tech than in traditional banks, so financial service innovations should be marketed as tech solutions (as PayPal has done with Venmo), not as “big bank” solutions.


The Generations Defined

The Millennial Generation

Born: 1981 to 1997

Age of adults in 2017: 20 to 36

Generation X

Born: 1965 to 1980

Age in 2017: 37 to 52

Baby Boom Generation

Born: 1946 to 1964

Age in 2017: 53 to 71

The Silent Generation

Born: 1928 to 1945

Age in 2017: 72 to 89

Erick Arndt

The Greatest Generation

Born: before 1928

Keith Renno

Age in 2017: 90 or older





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