In a previous article, we talked about client segmentation and explored how dividing clients into target markets can improve engagement, efficiency, and profitability for financial practices.

In this article, we dive deeper into specific client segments, focusing on Millennials (also called Gen Y). While many advisers still see this generation as a fringe market due to their age and fewer assets, Millennials are growing up fast and actively seeking financial advice. With a $3 trillion intergenerational wealth transfer happening in Australia over the next two decades, Millennials are not just future clients but key players in building sustainable, fee-based financial advice businesses today.

Understanding Millennials

So, who are the Millennials?

A simple online search reveals various definitions, but most agree with McCrindle Research, which says the oldest Millennials have just turned 40. According to McCrindle, there are over 5 million Millennials in Australia, meaning they outnumber both Gen X and Gen Z. By 2025, they are expected to make up a third of the workforce, surpassing Gen X (28% of the workforce) and almost matching Gen Z (31%).

Rather than being the consumers of the future, Millennials already account for about a third of all consumer spending, making them a market companies in every sector must pay attention to right now.

We’ve all heard the stereotypes: Millennials are lazy, expect quick promotions, need constant praise, spend too much time on social media, and still live at home.

Some financial advisers have also pigeonholed them, assuming they don’t need or want advice because they are too young or don’t have enough assets yet to justify expert help.

But is this true?

Breaking Stereotypes

Looking beyond stereotypes, we can identify several characteristics that define Millennials and reflect the world they grew up in.

Tech Savvy: Millennials are the first generation of digital natives, shaped by the internet and mobile technology.

Social Media Experts: They use smartphones and social media as their primary source of information and the way they consume products and services.

Cause-Driven: Whether at work or in their personal lives, they are motivated by the causes they care about, like climate change, fair labor practices, and diversity and inclusion.

Experience-Focused: Many Millennials prefer city living, travel, and experiences over suburban homes and car loans. They are the first generation to fully embrace work/life balance.

Millennial Financial Habits

Their approach to money also sets them apart from older generations.

Credit: Millennials have a different attitude toward credit. They are 37% less likely to own a credit card and carry lower debt levels as a percentage of their income compared to older Australians.

Property: One of the biggest financial challenges Millennials face is home ownership. Despite rising property prices making it harder for them to enter the housing market, about 80% of Millennials still aspire to own a home and are willing to make sacrifices to achieve this dream. Many are even putting off having children to save for a house.

Investing: Of the 46% of Australians who hold investments outside their home or retirement funds, Millennials are the fastest-growing demographic. Around 40% of young Australians invested in the stock market in 2020, with 44% of Millennials being first-time investors. They are also significant participants in other investments like cryptocurrency and self-managed super funds (SMSFs).

A Growing Need for Expert Help

Despite being good savers, with 36% of Millennials regularly setting aside money, many still don’t have a formal savings plan. This is especially concerning since their financial priorities—home ownership, travel, and financial independence—largely depend on savings.

Encouragingly, Millennials know they need expert help. According to research, they are seeking advice from qualified financial advisers to assist them with budgeting, cash flow management, financial coaching, and retirement planning.

Implications for Financial Advisers

To effectively engage Millennials, advisers must adapt their approach to meet the unique needs and preferences of this generation, focusing on areas like:

– Types of advice and fee structures

– Communication and marketing strategies

– Sustainable (ESG) investing

Tailoring Advice for Millennials

Research shows that Millennials, like other generations, want help with budgeting and cash flow management. Financial coaching is also in high demand, especially for younger clients. This opens up opportunities for advisers to offer stand-alone services that clients will gladly pay for, even if they don’t have substantial assets yet.

Advisers can explore different pricing models, such as short digital courses, tiered service packages, or subscription-based models. Financial coaching can be offered through fixed-term programs, monthly retainers, or even group coaching sessions.

Communication and Marketing Strategies

Millennials are comfortable using technology for research, shopping, and banking, but when it comes to financial advice, they still prefer human interaction. Social media has become a key tool for reaching them, with platforms like Instagram and TikTok gaining popularity for financial content.

It’s important to avoid jargon when communicating with Millennials, as they prefer straightforward and engaging language. Many financial service providers are turning to interactive tools like apps and gamified content to make financial advice more accessible.

Environmental, Social, and Governance (ESG) Investing

Millennials are leading the charge in demanding sustainable investment options. They expect fund managers to consider ESG factors, and advisers should be prepared to meet this growing demand.

Conclusion

Millennials, the largest group of consumers and workers in Australia, are set to benefit from a historic wealth transfer. Though they were once overlooked as a viable market for financial advice, many Millennials now recognize the need for expert guidance and are willing to pay for it.

By understanding the characteristics that set Millennials apart from older generations, advisers can tailor their services and build lasting relationships with this key segment of the population.