Do millennials have it all? Former US President Barack Obama hailed the current era as the “most peaceful, most prosperous, most progressive” in history. But does this mean millennials can look forward to a comfortable retirement? Perhaps not, given the challenges they face in managing their finances and the negative sentiment around pensions. But the financial services industry can make a difference to change millennials’ attitudes, and a recent panel discussion hosted by the Financial Services Forum explored what this might entail.
Clouds, but a silver lining too
Contrary to popular opinion, a lot of millennials have other things on their mind besides instant gratification, not least saving money. Many would like to start building up nest eggs for retirement. But they face several challenges when doing so, according to panellist Alistair McQueen, who heads Aviva’s Savings & Retirement division. Millennials have been impacted by sluggish real incomes and large debt burdens. Most struggle to get on the housing ladder without relying on their parents’ savings.
Consequently, millennials are less likely to own property than the baby boomers, so will probably have higher housing-related expenses on retirement. Of course, as the panel’s chair – Peter Elliott, Legal & General’s head of marketing – pointed out, millennials are poised to inherit the wealth accumulated by their parents. But in many cases, that may not be enough to ensure millennials are able to retire comfortably, especially with the shift from defined benefit schemes to defined contribution schemes. “The onus is on individuals to take accountability for ensuring they have large enough nest eggs when they retire,” said McQueen.
Encouragingly, the evidence suggests that millennials are actually leading adoption when it comes to auto-enrolment. McQueen pointed out that this should make them fertile hunting ground for providers of pension products, especially as millennials are considered to be the best-educated generation and like to be in control of their investment decisions. But for this to happen, millennials need to be engaged with the industry on pensions.
How can marketers engage with millennials on pensions?
All the panellists agreed that pensions have had bad press, thanks to incidents such as the BHS scandal. The panel also agreed that the general lack of transparency in the financial services industry can put off investors. According to panellist Andrew Moffit, managing director of Ferrier Pearce Creative Group, one reason for the lack of transparency is that the language used by most people in the industry is “un-understandable”, a factor that inhibits trust.
Eschewing jargon can be one step to increase transparency, as can educating investors. One example of a firm that’s done this successfully is Schroders, which recently launched a financial education website to explain investing to millennials in simple language.
But Moffit pointed out that education isn’t enough to change people’s behaviour. It is also important, said Lauren Peacock, campaigns organiser at ShareAction, for providers to be more transparent about the pension products they offer, like Norway’s government pension fund does. Nor is it sufficient to just provide information that meets legal and regulatory requirements; the industry must look to engage dynamically with investors, Moffitt said. This can make millennials more keen to invest, while also offering a way for pension providers to differentiate themselves by demonstrating wider value – an important characteristic in an industry where product differentiation is so difficult.
“Marketers need to get people to appreciate pensions,” said Moffit. This involves showing people how pensions can satisfy their needs and wants. He also pointed out that marketers should not be shy of emulating successful consumer marketing techniques from other industries. Because after all, pensions are competing with other consumer goods for inclusion in a monthly household budget.
Creative and distinctive communication can help ensure the overall message is compelling. Using videos is one way in which marketers can do this, according to Moffit. Moreover, he said that pension providers should develop detailed marketing strategies with a clear narrative. They also need to understand members’ views, through engaging with people beforehand. It is also important for marketers to show millennials how they can be involved in successful investing.
One way in which marketers can do this is by drawing millennials’ attention to the fact that their investments can make the world a better place. But asset managers are not currently providing the right kind of content on ESG and responsible investing, according to our research. Engaging more with millennials on these factors can help change their mindset that pensions are boring, especially as various surveys suggest that millennials have a greater sense of social purpose than previous generations and are more open to new ideas. Consequently, they should be particularly receptive to marketers telling them how they can do well by doing good.
The industry needs to embrace techology
All the panellists agreed that marketers can use technology to engage with millennials on pensions. And that the industry is ripe for disruption, so the opportunity for change is huge. As well as considering how to make communications digital-friendly, as Peacock put it, marketers should also use technology to encourage investors to make their own choices.
The trouble, according to McQueen, is that the financial services industry is in the “stone age” when it comes to technology. Asset managers can take a few tips from other areas of the industry which are harnessing technology effectively to connect with millennials – namely Monzo in retail banking and Nutmeg in the investment advisory space.
While millennials face some financial challenges, many are still willing and able to start accumulating pension pots. Marketers need to encourage them by making the industry appear less opaque, embracing technology and using more effective communication strategies.
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