Print this article

A Generation Comes of Age: Inheriting Gen-Y

Zoë Couper

Carte Blanche Communications

1 March 2006

They’re young, smart and brazen. Today’s young inheritors – the biggest generation since the baby boomers – are coming of age. 2.1 billion-strong and with $40 trillion wealth coming their way, they’re a generation set to make or break tomorrow’s corporate environment and financial profit picture to boot. Welcome to my generation - Generation Y. Born roughly between 1976 and 2002, Generation Y is a segment more than three times the size of their Gen-X predecessors and equal to the Baby Boomers but with vastly different experience and attitudes. These young people make up the most globally aware and racially diverse generation in history. From a wealth management perspective, this generational wealth transfer constitutes a remarkable opportunity. The industry hasn’t been dealt an opportunity like this since the post-war baby boom hit. Yet for a lot of established institutions, Generation Y poses massive risks. This is the first generation to come along that’s big enough to hurt a brand simply by giving it the cold shoulder – and big enough to launch rival boutiques with enough weight to threaten the status quo. As this huge new group elbows its way into the marketplace, its members are making it clear that firms hoping to win their hearts and wallets will have to learn to think like they do – and not like the boomers who preceded them. Reaching this younger generation is critical for the wealth management industry. As the Baby Boomers retire, the industry must begin institutionalising its relationship with the next generation – and maintain vital sources of revenue – by focusing its energies and attention on marketing to Generation Y. Rehashing old strategies simply won’t cut it; a complete paradigm shift in the market is needed and its success will help determine if the industry can strengthen its growth and continue to increase assets in coming decades. Financial institutions need to adapt both their communication and recruitment strategies to better engage the new generation rather than expecting them to conform to old styles. After all, generally-speaking of course, Generation Y makes decisions differently. Where their parents value expert advice and information, and are confident investors with medium-term goals and a credit-savvy approach, Generation Y are peer-directed decision makers and are credit-dependent, uncertain spenders with alarmingly short-term goals. All this and with zero brand loyalty? It’s no wonder that 92 per cent of heirs switch advisors soon after inheriting. This generation responds to values-based positioning. Focus needs to be on the triple-bottom line: Profits, Planet, People. The recent GenNext™ study, conducted by trend-tracking experts Nickles+Ashcraft, revealed a fiercely ambitious and demanding generation; comprising one third of those aged 16 to 20 who feel they could run a company tomorrow. They are as high performing as they are high maintenance. As one young inheritor confided, “We are willing and not afraid to challenge the status quo. We don’t just take it as given that our advisors are experts.” And why should they? This generation is vastly better educated than their parents ever were. And with educations spanning multiple continents and in multiple disciplines – often including finance - this generation is likely to keep their advisors on their toes, or they’ll just invest it themselves. Life has always moved at a very fast pace for this generation. Instantly empowered from a young age, the internet has taught them there is no need to wait for anything. After all, this is the generation that has been reared on exponential advances in technology. In fact, Generation Y has little memory of life without it. Perhaps the digital divide is best illustrated by the fact that 51 per cent of those in their mid-late 20s would invest online vs 38 per cent of those over age 35. The age old axiom that "children should be seen and not heard" doesn’t ring true for this generation. They have been included in family decisions from their earliest days. They have been taught to speak up and their opinions have been considered and valued. Their resourcefulness around information technology has enabled them to research and learn the machinations of their families’ banking relationships more quickly than older generations have anticipated; therefore they are ready for real involvement because they are up to speed faster. Research jointly commissioned by Carte Blanche Communications and Tulip Financial Research found that 55 per cent of HNWIs felt a financial education programme would be of significant value to their next generation. However, financial institutions are coming up short – 45 per cent of relationship managers surveyed by Cap Gemini World Wealth Report say MTMs are ill-prepared to pass on their wealth to their heirs. Generation Y unlike any other, has lived in a time when the media and tell-all books demystified all their heroes. They watched the confessions of Princess Diana, saw sports figures discredited and heard a president lie. They have few illusions about what the world is really like and thus are sceptical and wary. They have seen too much to believe everything at face value. Because their scepticism has led them to question much of what they see and hear, they value transparency, pragmatism and authenticity. Interestingly however, the younger the client, the more important the personal relationship with their financial advisor/banker becomes. Thirty five per cent of those in their early-mid 20s say this is very important versus 26 per cent of those over age 35. Their parents confirm this in our research; 57 per cent felt it was important for their young adult children to have a relationship with a trusted advisor. However with 85 per cent of relationship managers over age 45 and only 3 per cent under age 30, it is clear that current product and delivery systems do not match the needs of this emerging audience. Breaking through to this generation will be challenging; they process information quickly and embrace change. Having been raised in a time of constant change has made them very adaptable. They do not sit around and wait for things to happen when they know they can make things happen. For them, life is about what is ahead, and how quickly you can react, adjust, adapt. The question is: Can your business keep up?