While Generation X – or those born roughly
between 1964 and 1980 – have adjusted to technological innovation and digital
disruption, millennials are the ones actually propelling it. Most young people
today will use online apps to shop for groceries, get a cab, read the news or
find rental accommodation.
The huge leaps in technology and its capabilities
have made this possible. An iPhone 5, first introduced in 2012, has 2.7 times
the processing power of a 1985 Cray 2 supercomputer, and this accessibility has
helped transfigure daily life and working practices.
Financial institutions
have been waking up to the fact that millennials are the next generation of
investors for some time – despite perceptions that they are a demographic with
less cash and a poor understanding of personal finance. The latter shortfall
can be solved fairly easily through better education, but long-held views about
millennials’ lack of disposable income should be put to rest now.
Research by
the Center on Wealth and Philanthropy at Boston College estimates $59trn will
be passed down from 93.6 million US estates between 2007 and 2061, in what will
be the greatest transfer of wealth in history; and millennials are likely to
inherit a significant proportion of this total. Wealth preservation needs will
require this demographic to save and invest for the future. But millennials are
not just the investors of the future – they are the employees too. An Ernst
& Young (EY) report said 75% of the global workforce will be millennials by
2025, and a significant percentile of this demographic is already employed in
management roles. The EY study said 62% of millennials work in management,
putting them ahead of the baby boomers. These are the clients of tomorrow.
The
financial services industry is making in-roads with this group, and online
banking perhaps is the best known example, but how are asset servicers helping
bring about digitisation and abridged user experiences to millennials?
Appealing to a younger generation
Generational shifts mean that end users of services – whether it is a fund manager or institutional investor – will have markedly different expectations over the next few years. The words ‘instant gratification’ are often used liberally to describe millennial expectations, and it is a fitting reflection.Younger people will frequently complain if there is a slight holdup to an online delivery or movie streaming service. As such, millennial clients will increasingly demand investment exposures, performance metrics, risk analytics, counterparty risk details, liquidity data, client reporting or information about collateral movements in real-time.
Those providers who insist on manual processing of reports and templates will be disadvantaged in this new digital age. Forcing clients to log into websites utilising a physical token to access data is no longer going to be acceptable. Asset servicers need to ensure that reporting is through systems or technologies that are embraced by millennials, whether it is via smartphones, tablets, APIs or online chat facilities.
Information must be accessible anywhere in the world given the increasingly mobile nature of workforces. Furthermore, such automation of services will lead to lower costs, and this will help the client.
This article was originally published
in HFMWeek in June 2017