Financial planners could be forgiven for not wanting to attract generation Y as clients given the tide of negativity thrown at the segment by countless studies depicting their frivolous spending habits and tendency to rack up enormous amounts of debt.
This cohort of 20 and early 30-somethings are better described by some as the “me generation” – with the purchase of a flashy car, iPad 2, Miu Miu handbag and that big trip to Europe or the United States much higher on the priority list than saving.
The Millennials are tech-savvy. Social media, internet chat rooms and text messages are their realms of communication for keeping in touch with practically everyone. But these methods are potentially a deterrent to practices stuck in doing business and marketing the old fashioned way.
Many planners also don’t want to take on gen Y clients because they have too little investable assets to justify being worth the time.
But industry experts and several practices that have managed to penetrate the gen Y market warn that this approach could be short-sighted and those not putting in the effort to connect with gen Y today could be missing out on tomorrow’s big client.
McCrindle Research director Mark McCrindle says gen Y’s are an important target market and that it is important for planners to take note of their rise.
“We are talking about 4.65 million people born from 1980 through to 1994 in Australia, more than one-fifth of the total population is gen Y,” he said.
“But not only is their size large but their life stage is spot on. They are currently 18 per cent of the workforce and within a decade they will be 35 per cent of the workforce, they are moving from the smallest generation of the workforce to the largest within 10 years.
“In other words they are right now moving into those wealth accumulation years. They are going to be working later in life than any previous generation, so they will actually accumulate more money in their lifetime than any other generation.”
McCrindle says businesses able to connect and communicate effectively with gen Y’s are poised to do well.
“The attitude is that gen Y are hard to attract and they are particularly hard to retain because there is low loyalty,” he says.
“The attitude in financial services is also that you spend a lot of money trying to connect with them and the return for this generation is quite low because their net worth is quite low and also that they are such a fast moving target and they are so fragmented as a consumer segment that it’s really like throwing money in the wind it’s just hard to connect with them.
“Now all of those statements are true empirically but they are also radically changing. So yes, they are not as loyal as customers used to be but if you get the right communication and you offer the right products they can show great loyalty.
“In fact the lifetime value of a gen Y customer will be greater than the lifetime value of a boomer just because they are working later in life, spending later in life and accumulating super earlier in life. So they are actually potentially a better customer.”
The Association of Financial Advisers chief executive Richard Klipin agrees gen Y is a key target market.
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