Knowledge is Power for the Next Generation
Millennials are the emerging engine of the modern economy. Born from 1980 onwards, this generation are globally mobile, digitally savvy, online communicators who tend to be better educated than their parents’ generation and aspire to do more purposeful work that goes beyond the monthly pay-check.
They value experiences over long-term financial commitments. Many are likely to change careers during their lifetime and they possess a keen entrepreneurial, risk-taking spirit. Above everything else they are knowledge-empowered, having grown up in an environment that is ever-connected online, and value clear and accessible information. They are likely to live longer and therefore need more money for retirement. When it comes to personal finance what worked for other generations won’t cut it. The status quo is not an option.
Millennials are not an abstract sociological category; they are a cohort of customers with increasing financial clout.
The opportunity is clear: according to consultancy Accenture, Asian millennials will have more spending power than any previous generation by 2020, with an estimated S$8.1 trillion in disposable income. Here in Singapore the millennial market is large, it’s growing, it’s resourceful and it has significant financial needs that need to be met. In Singapore there are 500,000 millennials and that group now comprises a quarter of all foreign workers. By 2018, millennials will comprise the largest workforce demographic in Singapore. Singapore’s millennials are good earners, great spenders and they value experiences and are prepared to spend on them. However, they tend to be poor savers. Millennials eat out on average five times a week and their retail spending is three times that of those over 35.
It would be wrong to think that Singapore’s millennials have a ‘devil may care’ attitude to their finances. According to an article in June’s Straits Times 46 per cent of millennial investors aged 18 to 39 in Singapore viewed retiring early as one of their top investment goals. To put this in context, that is double the average across Asia. They are also acutely aware that they have longer life expectancy than their parents and therefore will require greater retirement provision. Delivering solutions that meet that need is a challenge for us all.
Personal financial advice* is evolving but remains highly relevant
Millennials, with their ‘digital first’ approach, are much more open to tech-savvy platforms and services that allow them to manage their portfolios and diversify their investments compared to previous, more risk-averse generations. According to the Wall Street Journal, more than 30 per cent of millennials stated that they’re more loyal to brands that are up-to-date with regard to tech. They’d rather invest with a company that caters to those needs by providing easy access via digital platforms rather than be constrained by form-filling, paper docs and signatures.
Traditional approaches will not meet millennials’ needs and we must adapt accordingly. But many of the new, technology-led entrants to the market are unlikely to fulfil their requirements either. So what do they require from financial advisers and why is personal financial advice* still relevant for this generation?
First of all, it is all about knowledge empowerment.
At FPI, we are working to make millennials understand we are supporting their goals with products designed to help them to achieve their goals.
Millennials often rely on their own research and they are fonder of self-investing than previous generations but having professional advice* can help them make the most of their resources. This is the fundamental benefit of advisory services* versus robo advice: providing a tailored and bespoke offering, not an off the shelf product which is investment-led rather than customer-led.
Second, they value flexibility and convenience. They want products that reflect how circumstances can change throughout their lives. They are looking for a plan that offers flexibility and caters to short-term or mid-term savings needs, such as withdrawal flexibility. At different milestones in their lives they may wish to make a lump sum withdrawal or regular withdrawals and would have little time for providers that do not reflect this thinking in their products.
Third, embracing digital allows us to reflect millennials’ user preferences. We recognise the need to provide clients with round the clock access to their portfolios as our clients are becoming increasingly more mobile and informed. We’re investing our resources in this approach and it will be the main focus for the next few years. Our Digital First strategy allows us to focus on delivering what clients want by providing more functionality online. We have self-serve, online access through the FPI Portal which allows clients to have a single view of their portfolio and to monitor their funds. Because millennials are hungrier than ever for relevant information, we’re adapting new content in the form of products, services and rewards that transform financial planning into something that is less of a chore and more of a choice.
Planning for Millennials’ future needs
At FPI, we are clear about the best strategy for millennials to plan for their future needs and to avoid common pitfalls. Have a considered investment plan: this plan should be based around structured products that have medium to longer term horizons instead of short-term stock picks. Start thinking early: it’s important to pick the right solutions and start thinking about wealth accumulation as early as possible given millennials’ increasing life expectancy. Consider legacy planning: it’s important to think about legacy planning through plans that can be adapted as they progress through life stages. Above all, seek good professional advice*: a good adviser and a good platform should allow millennials to manage a portfolio that offers a multi-asset and multi-strategy approach in order to achieve potential growth that may beat inflation. For knowledge-empowered millennials, good professional advice*, flexible products and a user-friendly platform is what it is all about.
*Friends Provident International does not provide legal, taxation or investment advice. You should obtain advice that is independent and directly relevant to the specific legislation within your country of residence. If you do not have a financial or legal advisor then we strongly recommend that you appoint one.
Adrian Emery – CEO FPI
Message from the CEO – Jan 2018
Keeping you informed
I’m often asked by people outside this industry exactly what FPI does. Given how complex the financial services industry is, you might think the answer would be difficult but we think it’s straightforward.