Millennials continue to change how businesses think in terms of customer loyalty. Last week, J.D. Power, the global market research giant, released its findings from the 2018 U.S. Full Service Investor Satisfaction Study, which were not surprising to those paying attention to other industries the last few years.
In the study, it found the key to retaining Millennial wealth is not simply new technology, but relationship cultivation and goals-based advice.
Mike Foy, Senior Director of Wealth Management at J.D. Power, thinks it is a best of both worlds scenario where both the technology and consumer expectations are influencing each other.
“On one hand, technology that people are exposed to in other aspects of their life is influencing their expectations in terms of what they are getting from their wealth management firm,” he says. “Wealth management, due to several factors, such as regulatory and compliance restraints, the demographics of financial advisors and the traditional wealth customer, has been lagging in terms of technology. I think customers are being exposed to experiences through technology in other parts of their lives and are expecting the same kind of experience to be available to them when dealing with their financial advisor. Texting, social media, video, etc. are things advisors are really just starting to dip their toes in the water on. These are things that consumers use and are expecting their advisor/firm to meet them where they are living. I think technology is changing people’s expectations. In a way, it is a chicken and egg, they both influence each other in a reciprocal way.”
The lines between full service and self-directed investors have become increasingly blurred over the last five years because of this “chicken and egg” relationship, he says.
“The industry used to think about the world in terms of putting investors either in a category where they were largely delegating responsibilities to a professional advisor, or they were do-it-yourself traders who managed their own portfolio through a discount brokerage platform like a Schwab, Fidelity, or E-Trade. We are finding more and more that particularly younger investors, but even older investors as well, over time want to get a best of both worlds type of service. We see that trend manifesting itself in several different ways. One is that an increasing number of folks who identify as full service also have a secondary self-directed account or vice versa. We see a growing number of folks, particularly among younger investors, trying new models like Robo-advice. Even if they have a financial advisor, we see them trying out alternative models. We see that they are increasingly accessing, whether it is account statement, thought leadership, or tools, they are increasingly accessing digital self-service type of resources.”
The study found four key findings: Millennial attrition risk is four times higher than other generations; technology may draw Millennials in, but advisor relationships keep them; emerging affluent Millennials want more advisor contact; and texting between advisors and investors has led to higher satisfaction rates.
The key to retaining Millennial investors is to use technology as a compliment to a human touch, not solely relying on one or the other.
“The value proposition that an advisor provides will continue to evolve,” Foy says. “At one point, you were paying your stock broker for essentially access to the market. With discount brokerages emerging, you no longer had to, so advisors had to provide more value in other areas, like asset allocation and portfolio rebalancing. Now, technology can do some of that, so it reinforces other aspects that advisors can do that is more differentiated, like helping to set goals, understanding unique needs, and providing transparency and education. There’s always things a human being can do better than technology.”