Millennial Money - Putnam InvestmentsMillennial Money Building your business for tomorrow, today Alexandra G. Nawoichik ... Understanding Millennial clients Overview Who Millennials
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Millennial MoneyBuilding your business for tomorrow, today
Alexandra G. NawoichikPractice Management SpecialistPutnam Retail Management
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Understanding Millennial clients
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Understanding Millennial clients
Note: See slide 31 for source.
“The young seem curiously unappreciative of the society that
supports them. ‘Don’t trust anyone over 30,’ is one of their
rallying cries. Another, ‘Tell it like it is,’ conveys an abiding
mistrust of what they consider adult deviousness.” – Time
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Understanding Millennial clients
“We do have a sense of entitlement, a sense of ownership,
because, after all, this is the world we were born into and we are
responsible for it.” – Evan Spiegel, 2015
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Understanding Millennial clients
Overview
Who Millennials are
Why Millennials matter to your practice
How to gain Millennial assets
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Understanding Millennial clients
Abstract
Who Millennials are
Why Millennials matter to your practice
How to gain Millennial assets/relationships
• Largest generation in U.S. history: ~75 million individuals• Not as difficult as advertised: ~75% want an older mentor• Wealthier than anticipated: 20% or 15 million have >$100K to invest
• Familiar financial goals: Want to save for retirement, educate children, and pass on wealth
• Growing wealth: Saving and inheriting more than predecessors• Seeking advice: 63% actively seeking financial guidance
• Strengthen online presence: 57% pre-shop online before buying in-store
• Focus on value prop: Looking for a tailored, not cheap, experience• Prospect: Use social media for offense and traditional networking
for defense
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Who Millennials are
Definition
Sources: Pew Research Center, 2016; National Public Radio, 2014.
1946 1952 1958 1964 1970 1976 1982 1988 1994 2000
Baby Boomers:Age 53–71 (~75 million) Generation X:
Age 38–52 (~66 million) Millennials:
Age 17–37 (~75 million)
10,000 Millennials turn 21 each day.
10,000 Baby Boomers turn 65 each day.
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Who Millennials are
Shaping a generation
Millennials Gen Xers Baby Boomers
Financial crisis 2008 financial crisis Dot-com bubble 1970s oil crisis and stagflation
Environmental development
Mainstream awareness of climate change
Discovery of hole in ozone layer
Publication of Silent Spring
Geopolitical concern
9/11 attacks/global terrorism
Transition to post-Soviet world order
Cold War
Technological disruption
Invention of smartphone Rise of internet Spread of personal automobile use
Social upheaval Campus and community protest movements
Race riots/Simpson trial Hippie countercultural movement
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Who Millennials are
MYTHMillennials don’t want advice from members of older generations
REALITY75% of Millennials want a mentor. Millennials want their opinions to be heard but love to learn from the experiences of other generations
IMPACTMillennials want true mentorship rather than cursory guidance. 74% of Millennials think advisors don’t offer truly customized advice
Sources: MediaPost, 2012; AMG Funds, 2017.
Myths surrounding Millennials
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Who Millennials are
Myths surrounding Millennials
MYTH
Millennials are averse to traditional face-to-face interaction
REALITY
Millennials value in-person communication in business situations, and
more than half prefer to communicate with colleagues face-to-face
IMPACT
Millennials want their advisors to communicate with them frequently.
They expect an annual average of 4 in-person and 5 phone meetings,
while Baby Boomers only expect 4 total meetings
Sources: Bentley University, 2014; AMG Funds, 2017.
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Who Millennials are
Myths surrounding Millennials
Sources: Deloitte, 2014; Toniic Institute, 2016.
MYTH
Millennials are selfish and entitled
REALITY
Two out of three Millennials report that they are concerned with the
state of the world and feel obligated to change it
IMPACT
Millennials need guidance on making an impact. 60% would like to
invest more than half of their wealth in ESG investments within 5
years, yet only 25% currently do so
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Who Millennials are
Who Millennials are
Sources: Census Bureau, 2016; Bank of America, 2016; BAML 2016/Trulia, 2016; Pew, 2014; PSPB, 2016.
• 54% either want to start a
business or already have
• 74% want flexible work hours
• 88% prefer a collaborative
work environment to a
competitive one
• Millennials actually stay with
their employers longer than
Gen Xers did at the same age
At work
• 27% of 18–34 year olds lived
with a spouse in 2016, while
57% of 18–34 year olds lived
with a spouse in 1975
• 39% of Millennials say they
interact more with their
smartphones than with their
human acquaintances
• While less than 40% of
Millennials own homes, 80%
of of them want to eventually
own homes
At home
• Millennials are the most racially
diverse U.S. generation: 43% of
Millennial adults are nonwhite
vs. 28% of Baby Boomers
• Not as politically liberal as
advertised: 29% of 2014 HS
graduates identified as conservative
vs. 21% in 1976
• Although Millennials tend to get
involved with issues at a grassroots
level, only 46.1% voted in the
2016 presidential election vs.
61.4% overall
In society
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Why Millennials matter to your practice
Savers Accumulators AttainersInvestable assets Less than $100K Between $100K and
$250KMore than $250K
Total number of prospects ~60 million ~15 million
Financial tendencies
Have modest financial goals
Prioritize shorter-term financial needs over longer-term financial goals
Set ambitious long-term goals
Prioritize financial advice but have limited financial knowledge
Engage well with financial technology
Have significant financial knowledge and want to be involved in investment decisions
Sources: LinkedIn, 2015; ThinkAdvisor, 2016.
Breaking down Millennials
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Why Millennials matter to your practice
Less positive market experienceAt same time in careers, Boomers had experienced average annual GDP growth of 2.8%, Gen Xers 3.3%, and Millennials 1.9%
Greater burden of college debt2016 graduates average $37,172 in student loan debt
Changing attitudes toward home ownershipMore Millennials are saving for travel (46%) than for a home (38%)
Delayed marriageIn 1980, two-thirds of those age 25–34 were married. In 2015, two-fifths of those in that age range were married
Greater life expectancyA 25-year-old male is expected to live to ~86, and a 25-year-old female is expected to live to ~89
Millennials have shifting challenges and priorities
Sources: St. Louis Fed, 2017; Forbes, 2016; Bank of the West, 2017; Bloomberg, 2017; Society of Actuaries, 2016.
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Why Millennials matter to your practice
Including an interest in sustainable investing
Impact investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.
Source: Toniic, 2016.
Are Millennials interested in sustainable investing?79% of Millennials describe themselves as sustainable investors seeking both financial and social impact returns
How widespread is Millennial sustainable investing?~50% of Millennials either don’t know their current allocation to sustainable investments or have 0–10% of their assets in sustainable investments
Will Millennials sacrifice return in favor of sustainability?13% say they are interested in opportunities aligned with their values, regardless of financial return
Which sustainable investing topics most interest Millennials?Agriculture ~30%Energy ~40%Environment ~30%
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Why Millennials matter to your practice
7%
20%
12%
42%
56%
10%
6%
3%
31%
65%
However, Millennials have life goals similar to previous generations
Source: Transamerica Center for Retirement Studies, 2016.
Saving for retirement
Paying off mortgage
Paying off student loans
Contributing to an education fund
Building a financial legacy 15%
21%
20%
36%
54%
Millennials Gen X Baby boomers
Financial priorities right now
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Why Millennials matter to your practice
Why Millennials are worth your time as clients
Sources: Forbes, 2017; Bankrate, 2016; The Principal Financial Group, 2015; Accenture, 2016.
SAVINGS
Millennials are around 50% more likely
than Gen Xers to save more than 5% of
their paycheck
Nearly three-fourths (74%) of Millennials
believe they should be saving 10% or
more for retirement each month
INHERITANCE
Wealth is expected to pass from
Baby Boomers to their beneficiaries
within the next 30 to 40 years
10% of the country’s total wealth
will change hands every 5 years
Statistic: Millennials earn 20% less than Boomers did at their age
Perspective: Boomers tended to start their careers early and work jobs that offered high initial
income but limited income growth. Millennials, on average, spend more time in school growing
their earnings potential, save more of their income, and stand to inherit a great deal of money
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Why Millennials matter to your practice
Millennials value both robo and traditional advice
Sources: HSBC, 2017; Global X Funds, 2017; LendEDU, 2017; Northwestern Mutual, 2016.
64% is the percentage of by which Attainers plan to increase their assets with traditional advisors over the next 10 years
63% of Millennials actively seek guidance on their financial decisions vs. 49% for Gen Xers and 34% for Boomers
69% of Millennials think a human advisor will get them a better return on their investment
21% of Millennials currently have financial advisors
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How to gain millennial assets
• 57% of Millennials said that they always or frequently conduct online pre-shopping research
• 62% of millennials say that if a brand engages with them on social networks, they are more likely to become a loyal customer. They expect brands to not only be on social networks, but to engage them
• 69% of UHNW Millennials select their FAs based on recommendations from family, friends, and colleagues
Sources: Oppenheimer, 2017; Deloitte, 2014; RetailDive, 2017.
How Millennials select advisors
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How to gain millennial assets
Building a Millennial-friendly brand
Positioning
Ensure that your practice’s online presence reflects your value proposition
Use CFP Board’s “Ten Questions” to articulate your value proposition
Segmentation
Identify a niche that fits with your practice’s identity
Utilize social media (e.g., LinkedIn) to connect with your targeted niche
Integration
Integrate advisors of all ages in transition plans
Leverage younger advisors for pure prospecting opportunities
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How to gain millennial assets
Working with Millennials
Sources: AMG Funds, 2017; Toniic Institute, 2016; AMG Funds, 2017; Accenture, 2017; JPMorgan/GIIN, 2011.
Emphasize goalsCoachSet expectations• 70% of Millennials think
computer-generated portfolios almost always outperform human portfolios, while 63% think computer-generated portfolios are almost always less risky
• 62% of people (all ages) surveyed by JPM and GIIN said they would sacrifice returns for impact
• Millennials are four times as likely as Baby Boomers to consider themselves knowledgeable about investments
• Yet they require extensive counsel. 50% of Millennials say they would never take an FA’s advice without consulting another source
• Millennials expect an average annual return of 13.7% from a portfolio allocated 30% to equities. Baby Boomers and Gen Xers expect an average annual return of 8.6% from a portfolio allocated 46% to equities
• 38% of Millennials say advisor pushback is the main reason they don’t invest more in ESG
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How to gain millennial assets
Client Parameters Primary financial needs How to reach outSavers • 23 years old
• Single• Living at home• $40K in student loan debt
Budgeting help to manage student debt payments while saving to make rent/mortgage payments
Provide foundational information (e.g., on 401(k) and IRA) and build an initial connection
Accumulators • 28 years old• Engaged to be married• Living in an urban
apartment• $20K in student loan debt
Continued budgetary help as well as basic asset allocation advice to ensure proper mix of liquidity/safety and growth potential
Provide initial services to attract these clients for the longer term and/or start reaching out regarding intergenerational wealth transfer
Attainers • 34 years old• Married with 2 children• Living in a suburban home• No student loan debt
Complex financial strategyadvice to balance increasing short-term needs with significant long-term goals
Provide diverse financial strategies and focus efforts to retain for the long term
Segmenting your opportunity
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How to gain millennial assets
ProspectingFor pure prospects
• Use “Alumni” tab on LinkedIn to find young people in the area who attended your school• Target recently relocated Millennials to build lasting ties• Partner with local employers to offer financial training for new hires
For current client beneficiaries• Make sure you have met all your clients’ beneficiaries; family wealth days can be powerful• Schedule ‘financial checkups’ for college-age children visiting home• Offer to review 401(k) options for (grand)children of current clients• Offer mock interview for clients’ (grand)children during graduation season and help network for
outstanding beneficiaries
Retaining• If possible, implement flexible service/pricing models• Consider Millennials’ preference to communicate more often (9x per year) than their older counterparts• Use retirement calculator to emphasize the power of systematic investing• Create a newsletter/email targeted to Millennial clients; think theSkimm
Action plan for Savers/Accumulators
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How to gain millennial assets
ProspectingFor pure prospects
• Partner with local tech firms to target up-and-coming local leaders• Refine your prospecting niche using advanced search tools on LinkedIn• Set up a booth at a wedding expo to prospect Millennials facing a major milestone
For current client beneficiaries• Create an “I love you” letter to involve the entire family• Offer to involve adult children in philanthropic activities• Help parents and children create a transition plan for family business
Retaining• Offer childcare at client events to accommodate young parents• Understand Millennial tendency to expect higher returns, lower risk, and social responsibility; set
expectations accordingly• Simplify routine review process, possibly conducting via phone, while emphasizing in-depth meetings
based on client goals/life events
Action plan for Attainers
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How to gain millennial assets
Work with Putnam to …
Position my practice
Develop a practice-specific value proposition
Create a LinkedIn profile and review other potential
social media platforms
Schedule a LinkedIn training call with my Putnam
wholesaler to optimize my profile
Target Millennial investors
Use the Alumni tab on LinkedIn to target local
Millennials from my alma mater
Work with my Putnam wholesaler to arrange a family
wealth day for my clients
Connect with my clients’ beneficiaries on LinkedIn
Integrate Millennial clients
Review my investment lineup to identify Millennial-
friendly options
Utilize FundVisualizer and Portfolio Navigator to
develop fund narratives to coach Millennial investors
Be reachable via phone/text to offer meeting flexibility
for busy Millennial clients
Read Putnam’s Wealth Management blog to find
timely Millennial-friendly planning strategies
Encourage younger advisors in my office to connect
with Millennial clients and develop their skills
Why millennials matter to your practice
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Understanding Millennial clients
An Attainer and ESGTHE CLIENT34 years oldMarried with 2 childrenLiving in a suburban homeNo student loan debt
THE SITUATIONDuring your latest meeting with an existing Millennial client, the client mentions that she recently discussed ESG investing with a friend and wants to learn more. The client hasn’t previously expressed an interest in ESG issues, and you have allocated 0% of her money to ESG investments.
YOUR RESPONSESTEP 1: Make sure you are informed. The GIIN/TONIIC websites offer educational materials to teach you the terminology (sustainalytics, SDGs, etc.) and a newsletter to keep you apprised of the latest developments. Understanding the various causes and investment styles under the ESG umbrella will help you better understand what your client wantsSTEP 2: Enquire into client’s interest in the space and ensure it is genuine. ESG investing entails unique risk/return characteristics, so setting expectations is crucialSTEP 3: Maintain a working list of investment ideas (individual securities, funds, etc.) from which to make allocations. Work with the client to craft a goals-based plan to integrate social or impact investing into her portfolio. This client has complex financial planning needs and requires your expertise to manage her long- and short-term goals while fulfilling her ethical investment mandate
QUESTIONS TO ASKTo determine general interest: “If you could commit a small portion of your portfolio to companies and causes that matter to you while still responsibly growing your money for retirement, would you?”To determine familiarity: “Did you know that Sustainable, ESG, and Impact investing all mean different things?”To determine commitment level: “Would you be willing to spend an hour or two reading relevant materials so we are on the same page on how best to invest your money for impact?”
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Understanding Millennial clients
Putnam Retail Managementputnam.com
Source — slide 3: Time magazine, 1967
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For informational purposes only. Not an investment recommendation.
Consider these risks before investing: Allocation of assets among asset classes may hurt performance. Stock and bond prices may fall or fail to rise over time for several reasons, including general financial market conditions, factors related to a specific issuer or industry and, with respect to bond prices, changing market perceptions of the risk of default and changes in government intervention. These factors may also lead to increased volatility and reduced liquidity in the bond markets. International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Funds that invest in government securities are not guaranteed. Mortgage-backed investments, unlike traditional debt investments, are also subject to prepayment risk, which means that they may increase in value less than other bonds when interest rates decline and decline in value more than other bonds when interest rates rise. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Default risk is generally higher for non-qualified mortgages. Interest-rate risk is greater for longer-term bonds, and credit risk is greater for below-investment-grade bonds. Unlike bonds, funds that invest in bonds have fees and expenses. The use of derivatives may increase these risks by increasing investment exposure (which may be considered leverage) or, in the case of over-the-counter instruments, because of the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. The fund's sustainable investment strategy limits the types and number of investment opportunities available to the fund and, as a result, the fund may underperform other funds that do not have a sustainable focus. The fund’s investment strategy of investing in companies that exhibit a commitment to sustainable business practices may result in the fund investing in securities or industry sectors that underperform the market as a whole or underperform other funds that do not invest with a similar focus. Due to changes in the products or services of the companies in which the fund invests, the fund may temporarily hold securities that are inconsistent with its sustainable investment criteria. You can lose money by investing in the fund.
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