Milennials
- 2. Disclaimer Views expressed by our experts represent their sole thoughts on the topic of Insurance analytics. They do not necessarily represent the views of their current organizations and should not be seen as an endorsement of any group, product or strategy. The information and opinions in this document were prepared by FC Business Intelligence Ltd and its partners. FC Business Intelligence Ltd has no obligation to tell you when opinions or information in this document change. FC Business Intelligence Ltd makes every effort to use reliable, comprehensive information, but we make no representation that it is accurate or complete. In no event shall FC Business Intelligence Ltd and its partners be liable for any damages, losses, expenses, loss of data, and loss of opportunity or profit caused by the use of the material or contents of this document. No part of this document may be distributed, resold, copied or adapted without FC Business Intelligence prior written permission. © FC Business Intelligence Ltd ® 2015 7-9 Fashion Street, London, E1 6PX www.distribution-in-asset-management.com/usa HowFinancialServices canWinMillennials Author Gabriele Stonkute Editor Marsha Irving [email protected]
- 3. 3 How to Survive Disruption in Insurance Marketing and Distribution FC Business Intelligence recently surveyed over 500 Millennials to understand their current use of and attitudes towards financial services. Representing a broad range of demographics, the study returned interesting results. FC Business Intelligence researcher Gabriele Stonkute, a Millennial herself, explores the findings below and highlights the key take-aways for financial services organisa- tions, and the asset management industry in particular. Introduction I’m sure you have heard the term millennial (or Generation Y) used before (and if you haven’t- it’s used to describe the generation who are currently 18-35 years old). As this generation is becoming a significant proportion of both the workforce and consumers of financial products, companies are starting to see the importance of understanding the main characteristics and needs of millennials. Source: Elance-o-Desk Millennial Workplace Study 2015
- 4. 4 How to Survive Disruption in Insurance Marketing and Distribution Characteristics of Generation Y I’m not trying to say that the generation is homogeneous and every person belonging to it will have the same preferences, but there are 2 main factors that differentiate Generation Y from its predecessors: the fact that most of us have grown up with a rapid rate of technological advancement happening every year, and the economic climate (i.e. during and post GFC). This is a significantly different time compared to the one that our parents lived through. Goldman Sachs Data Story: Millennials details the significant differences between Generation Y and the generations before, charting attitudes towards life priorities, thought processes and how this impacts nearly every element of life as a millennial. The first characteristic of millennials is that we are tech-savvy, which brings about a number of other traits. This includes the desire to Google everything, watch a tutorial video on Youtube rather than ask a friend how to do something, read reviews to inform our decision making process, spend more and more time on our phones, and demonstrate very low attention spans. We have a need for simultaneous multi-channel interaction that is reflected in our buying behaviours too: we research before we buy things, we compare the prices, consult our friends and only then make a decision. That decision may easily be reverted from“buying this”to“not buying this”if the process of buying becomes too complicated. When it comes to the impact of seeing the financial crisis happen, it affected our employment prospects, financial independence and the age at which we become homeowners. That has created financial pessimism in the generation and lowered the trust in financial services.
- 5. 5 How to Survive Disruption in Insurance Marketing and Distribution Millennials indeed sound like a demanding customer segment that would be incredibly hard to please, yet there are certain brands that millennials love, such as Apple, Facebook, Google, Sony, Samsung, Nike, Amazon etc. However, among the top 50 brands that millennials love in the chart below, there is not a single repre- sentative from the financial services industry. Source: moosylvania Millennial Report 2015 Financial services firms are aware of the purchasing power that this new gener- ation have. They know that millennials are brand-aware, tech-savvy, and quick to complain. We’ve seen banks, asset managers, insurance companies, online payment providers etc. setting up facebook pages, we’ve seen them tweeting and growing their followers. But how effective are their current efforts? How do millennials really want to be reached and to what extent do they actually trust their financial services providers? We’ve conducted a survey of 500+ millennials from various backgrounds, working in different industries and living in different locations. We asked them a few basic questions on their interaction with financial services firms.
- 6. 6 How to Survive Disruption in Insurance Marketing and Distribution What financial services products do millennials use? Of the investment products, pension funds are the popular with 47% of respon- dents using them, this most likely comes down to regulatory initiatives and employment benefits. Pensions are then followed by ISA’s (44%) and then invest- ment portfolios which ranked the lowest at only 13%. Overall, financial planning products like ISAs or pension funds have nearly 50% of millennials using them. Otherwise, retail banking came first with over 80% of people surveyed admitting to using the service. Online payment services, such as paypal came second with 78% using them. Travel insurance ranked third with 58% of respondents. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Retail Banking Online Payment Services (like PayPal) Travel Insurance Pension Fund ISA Car Insurance Any other type of insurance Health Insurance Any Investment Portfolio What Financial Products do Millennials Use?
- 7. 7 How to Survive Disruption in Insurance Marketing and Distribution How do millennials engage with financial services? Online remains the most popular method of engaging with financial services providers (94%), followed by mobile apps (55%). However 56% of millennials state that they would like an option to call someone if necessary. Even though millennials are frequently characterised as likely to use social media to interact with organisations, only 32% admit to interacting with providers over social media, and only 11% admitted to interacting with financial services companies using this channel. So what’s preventing them from doing that? Let’s have a look at some of the responses to the open-ended question that was posed. “I’ve only used Twitter once to interact with banks and the likes and it was to complain about a horrible financial service provider. Why did I use Twitter? Because I wanted to voice my concerns with the whole community. However, it was only once, therefore I wouldn’t consider myself a frequent social media in the context of interactions with banks.” “I don’t feel it would accomplish anything beneficial for me, if anything it would be me wasting more of my time on them.” “I believe that by participating on social media we are allowing companies to track and trend us. I attempt to stay clear of social media for all financial matters.” “I am not sure whether my personal data would be safe. If I was making a complaint about customer services I may use social media, but not for personal questions.” Other respondents were mostly talking about trust and privacy issues, as well as the desire to separate their social life from their financial problems. Trust indeed seems to be keyword here: the survey revealed that only 55% of people considered the financial services industry to be trustworthy. Now that number itself does not give much insight into what companies could do to increase that, which is why we added another question asking exactly that. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Online Mobile apps Tablet Phone Face to face How do Millennials Engage with Financial Services?
- 8. 8 How to Survive Disruption in Insurance Marketing and Distribution How can financial services organisations win millennial’s trust? Better customer service and transparency were the dominating answers in our survey. According to the JD Power 2015 U.S Auto Insurance Study, the driving force behind an increase in auto insurance satisfaction was Generation Y, reacting to an improvement across customer service and customer experience. “They need to be more forthcoming and think about the customer experience. For example, I wanted to update my card and had to sit on the phone for 10 minutes listening to a monologue about the perks and cons of the new card which was completely impossible to take in. All of which didn´t really matter because the only relevant information: will I have to pay extra - I had to ask myself anyway.” “Not invest our money in fossil fuels or otherwise speculate with our money. The financial crash is still fresh in my mind where they stripped billions in public money, they aren’t regulated in the people’s interest.” “Be less rigid and cold when it comes to guest service. I don’t need to feel as if I’m imposing on that individual when I am seeking help from their profession. Generally the financial service employees are unable to relate to the increas- ing financial burdens of a millennial (i.e. Increased student loans, low minimum wage or even astronomical housing costs in certain parts of the world). Perhaps a better understanding of the financial challenges we face would encourage a more well-rounded discussion that does not leave one side feeling completely misunderstood.”
- 9. 9 How to Survive Disruption in Insurance Marketing and Distribution “More transparency about their products, not only‘salesy’beneficial aspects, but the real side, which is written in a smaller font and never communicated even if you ask. My personal opinion is that banks have double standards, if you argue and create a fuss they will do it your way. Otherwise everything is against you. Also different employees can give you completely different answers to the same question. I have no trust.” There also seems to be lack of financial education for the generation, as using financial jargon was also featured among in the answers. How financially educated are millennials? We’ve asked the respondents how they would rate their knowledge about financial products available to them out of 10 and the average was 4. Most people would be able to name the main retail banks, as they’re used to physi- cally seeing them, but what about the providers that are not seen on the high street? More than half (60%) of respondents said that they could name 1-5 investment management firms, which doesn’t seem like that many considering there are 3200 investment management firms in Europe alone. In fact, 43% didn’t know the differ- ence between investment banking and investment management! So it is not surprising that only a small proportion of millennials are choosing invest- ment management products if they don’t actually understand how they work. 0% 10% 20% 30% 40% 50% 60% 70% 0 Companies 1-5 Companies 6-10 Companies 10-20 Companies Over 20 Companies How Many Insurance Companies can Millennials Name?
- 10. 10 How to Survive Disruption in Insurance Marketing and Distribution Conclusion Generation Y is not impossible to serve well as we do, at the end of the day, need the products that financial services companies are offering, and following the survey results it seems that those who deliver adequate financial education, increased transparency and better customer service will be the ones that will be the most successful in attracting this generation of consumers. This study was completed in the lead-up to the Distribution in Retail Asset Management USA Summit, on the 1-2 of December at the Ritz Carlton Coconut Grove Miami. Featuring an all-star line-up of speakers from North America’s largest investment management firms, this two-day event is the premier event for asset managers looking to win investors across channels the fragmented distri- bution world. For more information, please go to www.distribu- tion-in-asset-management.com/usa
- 11. 11 How to Survive Disruption in Insurance Marketing and Distribution 1-2 December 2015 Ritz Carlton Coconut Grove Miami, USA Having a year of in-depth research with the retail asset management distribu- tion community, we have realized that getting a better understanding of what different investor segments expect from their investment management firms is a key priority for the industry. We wanted to get more information to share with our growing network in this space. FC Business Intelligence not only develops in depth white papers, reports, surveys, interviews, and infographics but it also creates high profile events for the financial services community. After the success at the Distribution in Retail Asset Management Europe Summit that took place in May in London, we have decided to host the inaugural Distribution in Retail Asset Management USA Summit to take place the 1-2 December 2015 in Miami. The European event received exceptional feedback. In fact, we had over 150 key asset managers and intermediaries join us including Aberdeen, Allianz, Amundi, AXA, BBVA, BNP Paribas, BNY Mellon, Franklin Templeton, Generali, Goldman Sachs, Henderson, Hermes, HSBC, M&G Investmetns, Northern Trust, Old Mutual, Pioneer, Pictet, Rothschild, Standard Life, Vanguard and so on. Already for the US show we have key wirehouses, platforms, RIAs, and major distributors confirmed to participate. Based on 26 years of experience in running high level events, we expect to gather 120+ senior marketing and distribution asset management professionals. To find out more about the event go to www.distribution-in-asset-management.com/usa Contact Us: Marsha Irving Head of Financial Services FC Business Intelligence T: +44 (0) 207 375 4353 E: [email protected]