14.15 FundForumMILLENNIALS

Millennials and Social SellingFunds Forum International, Berlin

June 2016

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Brian Byrne

Brian is President/ Founder of Aviador & Associates with thirty-five years of business experience in

Financial Services and Consumer Products and industries. His expertise spans Business Strategy,

Marketing Strategy and Innovation.

Prior to entering consulting, Brian was Vice-President of MetLife Financial Services in New York City.

He was previously a Vice President for both US domestic and global business functions for Citigroup,

where he reported to the CFO and later held leadership roles in Marketing/ New Product Development

and Strategy.

In 2003, Morgan Stanley retained Brian and his team to revamp Wealth Management Marketing

Strategy and key platforms to address emerging segments.

Prior to working on Wall Street, Brian spent sixteen years in increasingly responsible Marketing and

Strategy roles in the FMCG sector.

Brian has conducted scenario planning, innovation and business war gaming work in over 60 countries

worldwide and speaks Spanish fluently.

His interests include boxing, sailing, geo-political trends and is an active member of the Red Cross,

having served as a 9-11 recovery worker in New York City.

Business War Games

© Aviador & Assoc 2015

YOUR MILLENNIAL STRATEGIST

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WHO WE WORK WITH

AGENDA + GOALSAfter this Affluent Millennials presentation, you will :

Have insights into who they are, their financial mindset; decoding them and how they think about investing, wealth

Know what motivates them and how to reach them, how they select investment expertise, why they switch financial

brands, how they engage w Financial Institutions and their strong bias toward Financial Mobility

Consider mindshifts to let go of what worked in the past; exploit disintermediation trend and adopt FinTech-Enabled Social Selling

I. Decoding Affluent MillennialsWho are they? How are they different? What do they value? Where are they getting information to guide investment decisions?

“In Tech We Trust” “Don’t Talk Down To US”

HALF OF USA MILLENNIALS: “CAPITALISM DOES NOT WORK”

Traits of a “disaffected” group: Safe-space Special Sheltered Confident Team (Herd)-Oriented

Conventional Pressured Achieving Sharing

An evolution of preceding arch-types:

Boomers= PROPHETS Rock & Roll, Peace, Love, Greed Is Good, ME Generation

Gen X = NOMADS Grunge-Punk, Latch-Key, Cynical, Slacker

Millennials…. HEROS: first “native digital” truly global generation (traits span nationalities)

“TRUST SEEKERS”

Global spending is USD 2.45tn driven largely by social values and money concerns:

• Pursue passions, not paychecks

• Economically strategic (so, live w parents > 30, sharing economy)

• Connect with what inspires (so, influenced by celebs, heroes, “super-spreaders”)

• Seek authenticity (so, Funeral Directors and Lawyers rank higher for trust than Stockbrokers)

• Decisions not always evidence-based (i.e. be sensational or trustworthy)

• 75% stay awake at night worrying about money (Psychology Today, Sept. 2015)

A TALE OF TWO COHORTS (Maybe three)Intergenerational wealth transfer buffers some but not all:

1. Tech Entrepreneurs THRIVE as true Affluents (driving robotization of “work”)

2. “Payroll” Millennials DIVE (real wage deflation: “sharing / robot” world”)

“Payroll” cohort saddled with debt, 57% have credit cards, most revolve/ pay fees

USA total income grows to aggregate $8.3 USD trillion by 2025 (46% of total USA)

Returns on investments in USA, Western Europe (2016-2035) lower vs. past 30 years)

Equities, average annual returns anywhere from approx. 150 to 400 basis points lower

Fixed-Income, gap even larger, average annual returns 300 to 500 basis points lower, minimum

A 200 bps difference in average annual returns, over time, means…

…a 30-year-old today will work seven years longer to double savings to retire.

HOW THEY THINK

• Social ecosystems drive mindsets: “In” vs. “out” groups; strict boundaries

(work/ leisure); motivated by experiences, not objects

• Network responses: “attention economy”, “cult of personality”

• Gravitate to latin, asian cultural memes; American Millennials spend carefully

(USD 170 Bn a year: gadgets, travel, fashion etc.)

• Act as a “herd” (by age 18, 50% have chosen a career path)

Remember influence of the role-model “super-spreaders”:

2015 Linked-In IPSOS study:

A MASSIVE ASSET OPPORTUNITY

Many Affluents are Preppers (foresee Crisis 2.0, yet optimistic):

• “Banks” blamed for The Crisis (thinly capitalized in Europe, for example)

• Apple therefore a safer harbour (USD 150 bn liquidity on Balance Sheet)

Switching behaviour and loyalty driven by:

• Fear of making mistakes publicly (risk-averse, safety conscious, team-oriented)

• Less money-motivated; more community driven, civic-minded

(value freedom, collaboration and experience)

• Averse to being told what to do, think (confident but want praise)

• Less apt to plan in short-term (but do have a long-term life plan )

Brighter Tomorrow

TEN WEALTHIEST MILLENNIALS ON THE PLANET *

6/10 derived from sharing + social economy

* As far as we know (potentates, robber-barons not included)

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II. What MOTIVATES them? How

to reach them?

How select investment expertise? Why switch financial brands? How engage

w Financial Institutions given bias toward Financial Mobility?

“GAMIFICATION “TRENDING NOW”

MARKETS, ECONOMY VULNERABLE TO

HERDING EFFECT

Asset Management a complex system; “a dance between stability and

instability”

Millennials in general:

• have only known instability thus far

• “live in” and totally rely on network effects

• above all else, crave SAFE SPACES within the HERD

Professors Caballero, Farhi (Barclay’s data) calculated:

“Value of safe assets fell from 20.5 Tn to 12.2 Tn (or from 36.9% of

global GDP to 18.1%) during the Crisis”

A wealth SAFETY TRAP of immense concern to Affluent-Millennials

New behaviour learned

Alternate behaviour

emerges to destabilize system

…expands to

exploit

Environment;

Recipe for Resilience

• Heterogeneity

• Partial interconnection

• Redundancy (no one link critical)

• Frequent, rapid, moderate feedback

Recipe for Fragility

• Homogeneity

• High interconnection

• Every link critical

• Occasional, slow, violent feedback

Either alternate

behaviour

incorporated or

system

collapses

Decline in growth

leads to period

of local stability

Source: Citi Research 2016

FACEBOOK IS A MIRROR,

TWITTER A MEGAPHONE

65 percent saying losing phone has greater impact than losing their car,

63 percent stay updated on brands through social networks,

84 percent say “word of mouth” is primary purchasing influencer,

41 percent say that they purchase using their smartphones.

Implications for gaining their loyalty as Investment brand:

Must be app enabled on a mobile platform

Endorsements crucial (think Uber, TripAdvisor)

Ease of use (“one click”) is key

OUT OF INDUSTRY ILLUSTRATION: Payments Space

• VISA research: Millennials more likely to use, revolve a credit card (57% of total spend); migrate

cash to cards and as they age will spend more, require investment products

Asset Management Zone

Payments, Credit and Asset Mgt. Product Adoption Cycle

MEET THE AI.SSET MGT. DISRUPTORSFinTech enabled: modern portfolio theory and tools to track, rebalance portfolios

• multiple online access points (think mobile phone, tablets); low / no balance

requirements, low fees

• provide education, eLearning for novice investors

• sites look more like social media pages--Millennials recognize

Wealthfront: (was kaChing, a mutual-fund analysis company), pivoted into wealth management;

introduced "direct indexing“ tax-loss harvesting platform

FutureAdvisor automated based on investors' age and risk appetite apply MPT, Black-Litterman

and passive algos to balance portfolio (vs. "active" strategies); Fidelity Investments, TDAmeritrade

Betterment raised USD 700m, 60% higher than a year ago incl. (Stockholm-based) Kinnevik; robo-

advisor based with entire experience online, focus on ETFs

Swissquote over 230,000 (worldwide) clients; plans to grow to a million (Banking, Fx, Trading tools)

Deloitte forecast: USD 7tn AUMs under robotic management by

2025 (from 100bn currently in USA to USD 30tn market)

Kunal Punjabi

Certified Financial Planner

CFP, JD, CLU,

“ROSS” KNOCKING AT THE DOOR

• Advice, Solutions, Interaction Through A Single Person (not SAFE)

• Low Opportunities For Social Interchange to Shape Investment view

• Certifications meaningless (social reviews/ endorsements are key)

• Complexity of what goes on in between:

• Think: “Siri’s Big Brother”

• Investment Mix/ Asset Allocations delegated to Tech, Adv. Analytics

• “HERD” swarms concepts, trends (e.g. VR Oculus Rift “buzz” or TESLA)

• F2F Interaction Time Reserved for Social Value Add

“Hi, I amRoss”

My capital My net return…Activity in between…

III. What is SOCIAL SELLING?

Why is it a model suited to Affluent Millennials? How could it disrupt traditional Asset / Wealth Management models?

“ SAFETY NET beneath life’s tightrope” “SHARED decision accountability”

FINANCIAL MILESTONES (home, auto)

POSTED FOR ALL TO SEE, ENVYWhich financial milestones do they hope to achieve?

Aspire to home ownership, family. More important than careers.

Who do they trust?

Trust authority over individual people. Age of terrorism, helicopter parents, danger-obsessed media. Warm referrals key.

What is their ultimate reward?

Meaningful work. Either “chefs” or “CEOs” (not much in between)

Views toward education and performance?

Need structure of accountability. Both for themselves and for trusted sources. Work-along, deep interactions, collaboration vs. “cookie-cutter” formulas.

Hey kids, $’d my new CRIB + crazy RIDE in same day!??

“Ruthless Comparisons” UK study by E. Csoba (Gen Y Inc.)

High Engagement ExperienceSum total experience is paramount. “One click”, paperless.Simple. Interaction (e.g. quick-chat, etc.) mustemulate Mobile Apps.

Deep Insight

Social ProfilesMillennials will yield privacy

if there is “payback” in terms of personalization and social

connection.Advisor expected to already

know the prospect either through common contact or

social profiles.

Better Education, Support Success of the HERDAbundant financial education, gamified and delivered in digestible “chunks”.

Scaled in thousands of prospects, not dozens

(one at a time model)

WHAT IS SOCIAL SELLING?

WHEN HERDS TURN INTO MOBS

Many jobs automated, driving deflation in labour

Tipping point: pension funds funding gap grows larger in a

low growth scenario

USA, EU policy makers: prepare for later generation of

retirees with less income.

Conclusion:

RETRAINING AND RETIREMENT PLANNING more

important for Millennials than any other prior generation

“No one in 2016 is addressing the future … significant

structural headwinds influenced by too much debt and an

aging demographic, …the robotization of our future

global economy.

…every industry likely to become less labor-intensive in

future as new technology is assimilated into business

models. Transportation is an example: computer driven

vehicles will displace many truckers and drivers. Millions

of jobs will be lost over the next 10-15 years.

But medicine, manufacturing and even service intensive

jobs are at risk. INVESTMENT MANAGERS too!

- Bill Gross, Janus Capital (Spring 2016 letter)

III. (cont’d) Mindshifts To COMPETE

For Affluent MillennialsWhat culture changes required? How to add value in the new paradigm? How to

CONNECT?

Business War Games

© Aviador & Assoc 2015

MINDSHIFTS TO CONSIDER: Sales & Marketing Experience

“If you want my money, you should already know all about me”

Pull-oriented: “a buy it now” button, buy it direct;

We-oriented socialized “wealth of the commons” solutions

Beyond open architecture; cut out intermediary--add value

Traditional Model Social Selling Model

Apps !!! (gamified best); MPT (and other algo tools); “all in one

view” reports www.mine.com

Laborious fact-finds, forms, endless F2F meetings

Many intermediaries taking “a cut” without value-add

Compensation can drive “push” solutions

Self-serve platforms, rarely mobile or app-enabled

STOP SELLING, START ADDING VALUEThink “Ease of Use”

How they shop for other things

Be A Curator of Relevance

News tweets pertinent to their industry

Build a Social Edge (Retweets=New Referral)

Socially surround and engage prospects

Adopt “Know-Like-Trust-Buy” Engagement Model

“Earn” way to sale, pleasant surprises; ratings!

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40 percent of millennials surveyed by Mintel

(2015) said cereal inconvenient breakfast choice

because they had to clean up after eating it.

Q: HOW TO PIVOT? A: CONNECTED ADVISOR CONCEPT• Connected to Clarity of Purpose: “Living a Life of

Significance”; accountable advisors part of

something worthwhile (engage deeper, longer.)

• Connected to Clients (“client-centricity” focus)

converting clarity of purpose to serving Affluent

Millennial clients

• Connected to Company: it’s mission, it’s ethics,

it’s culture and teams.

IN SUMMARY:How To Shape The Millennial FutureWorld of Asset Management?

WHAT IS CHANGING HOW TO PIVOT TO NEW GAME

- Traditional “push” platforms obsolete

- Universal bank / wealth players shrinking

- Intergenerational wealth transfer

- “The Sleepless” Near-Affluents ignored

- “Used Car” selling approach

- New social “pull” communities rising

- Spread-bet across Disruptors; learn from them

- Shape end-game segmentation: FIRST MOVER

- Project lifetime VALUE (inheritance, career track)

- “Be UBER!” redefine experience and VALUE

A FINAL WORD FROM NEAR-AFFLUENT MILLENNIALS

LandscapeLM-Cerealia

(HAND OUT ) QUIZ MILLENNIALS AND ECONOMY

$1 trillion in student debt. [Bloomberg] $45 000 in debt. [PNC Financial Services]

Unemployment rate of 16.3% [Generation Opportunity]

40% of Millennials [American Psychological Association]

Just 6 in 10 Millennials have jobs, half are part-time [Harvard University]

284,000 American college graduates working in minimum-wage jobs in 2012. [Wall Street Journal]

48% of employed college graduates work in these jobs [ Center for College Affordability and Productivity]

50% do not believe that Social Security will exist (retirement age). [iOme Measure of Millennials]

average incomes have fallen 8% since the recession began in 2007. [Bloomberg]

63% know someone who had to move back home because of the economy. [Pew Research]

Median net worth fell 37% between 2005 and 2010. [U.S. Census]

Average student carries $12,700 in credit-card and other kinds of debt. [The Daily Beast]

Nearly a third have put off marriage or having a baby due to the recession. [Pew Research]

88% of millennials are optimistic about finding a job. [Millennial Branding & Beyond.com]

45% believe a decent paying job is a “privilege”. [Telefonica]

Over 63% of Gen Y workers have a Bachelor’s Degree. [Millennial Branding / PayScale]

Median salary across Millennials in USA is $39,700. [Millennial Branding / PayScale]

???? in student debt. The average Millennial carries ?????? in debt.

Unemployment rate of ????

??? of Millennials said their stress had increased last year

Just ??? Millennials have jobs, half are part-time

???? American college graduates working in minimum-wage jobs in 2012.

??? of employed college graduates work in jobs that don’t require a four-year degree.

??? do not believe that Social Security will exist when they reach their retirement age

Their average incomes have fallen ??? since the recession began in 2007.

??? know someone who had to move back home because of the economy.

Median net worth fell ??? between 2005 and 2010.

Average student carries ??? in credit-card and other kinds of debt.

Nearly ???? have put off marriage or having a baby due to the recession.

??? of millennials are optimistic about finding a job.

??? believe a decent paying job is a “privilege”.

Over ??? of Gen Y workers have a Bachelor’s Degree.

Median salary across Millennials in USA is $39,700.

Q A