According to The Globe and Mail, four drivers of the American financial economy are being eschewed by millennials as they come of age: home ownership, personalized service, debt and the stock market. This development has banks wringing their hands as they struggle to figure out how to change in order to be relevant to millennials.
Generally, millennials are those born between 1982 and 2002. Today they represent the largest slice of the U.S. labor force. Projections have the group’s numbers swelling even more since the youngest of them are on the threshold of adulthood known as adolescence.
Millennials’ three main parents are the Internet, social media and the financial crisis. Due to these three factors, which formed the character of this generation, millennials are believed to be a different kind of consumer.
As businesses change with the times, banks may have a particularly difficult time adapting to millennials because this generation is averse to basic banking services and products. As if that wasn’t enough, some of them blame the banking industry for causing the financial crisis that killed many of their hopes for upward mobility.
In correspondence with The Globe and Mail, Goldman Sachs Analyst Conor Fitzgerald, who reviewed a Goldman Sachs survey examining millennial attitudes toward several mainstream financial services, opines that millennials may have priorities that differ from those of previous generations.
For example, according to the survey, when it comes to choosing a bank, millennials don’t care as much about personalized services, like mobile banking apps, as they do about other factors.
In order of priorities, millennials ranked reputation and values of the bank first, proximity of the bank to work and home second, personal service third and online platform fourth.
725 millennials participated in the Goldman Sachs survey.
Telling from the survey, it looks like banks will need to change how and what they offer for sale to millennials.
For example, if it’s true that millennials are averse to debt how will banks sell their signature product: the loan?
One key question in the survey was what they would do if they suddenly came into a lot of money. 43 percent of participants said they’d pay down debt. Less than 18 percent said they’d use it for a down payment on a home or invest it with the aid of a financial advisor.
Millennials don’t trust the stock market. Only 19 percent of participants would invest in stocks as a way to save for the future. Most of them were either judiciously skeptical or were downright averse to them.
Banks are not going to do much business selling homes to millennials any time soon because few of them aspire to owning one already. Only 29 percent of them are saving for a down payment on a mortgage and 39 percent said home ownership was not a near term goal.
To end, according to Fitzgerald, millennials “hate fees.”
55 percent of participants would switch banks if fees got too high. 42 percent of them said they try to avoid them by any means necessary.
Writing to The Globe and Mail, Mr. Fitzgerald stated, “By 2038, millennials will become the most important financial generation in America, and the industry will have to adapt to meet their needs.”
Will banks do so in time?
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