millennial market

Research by Private Banker International suggests wealth managers are equally focused on building relationships with millennials as well as other generations to ensure wealth flows in the right direction.

Also dubbed “Generation Y”, millennials are typically those who were born between the 1980 and 2000.

According to a report by consulting firm Deloitte, the wealth of millennials is predicted to more than double by 2020 compared to 2015, with estimates ranging from $19-$24trn (£13trn-£17trn).

Despite this some players say that they do not take specific measures to cater to millennials.

Nick Middleton, co-head of digital platform UBS SmartWealth, says: “We don’t distinguish necessarily between generations like that. What we do distinguish between are people who have a preference on how they want to go about their wealth management.”

“Millennials have driven a lot of digital evolution. But it is being picked up by all generations.”

He continues: “If you focus all your attention on millennials, the bulk of the wealth is not there. They are going to be large inheritors of money but I don’t think that is necessarily a millennial thing. I think that is something that [applies to] every other generation.”

Max Rothery, Digital Growth Strategy Manager at private bank Kleinwort Hambros agrees. He says the total liquid wealth of individuals aged between 25 and 34 in the UK is £14.7bn.

But he adds: “Although this seems significant this covers a population of roughly 7.5m and therefore the average liquid wealth is less than £2000. The current size of the market of HNW millennials is not yet large enough for private banks to generate significant revenues from a dedicated offering.”

However, Simon Miller, UK co-founder and CEO of robo-adviser Scalable Capital, disagrees. “Even though millennials may not hold the majority of the wealth, the relationships they make now with financial service providers will determine where that wealth flows in the future as it passes down a generation.”

A spokesperson for UK robo-adviser, Nutmeg says: “At Nutmeg, we haven't specifically targeted millennials, or in fact any other group. What we have found is that because our proposition is intuitive to use, it appeals to a broad range of investors, and this is reflected in our customer base - our oldest customer is 96 and our youngest is 18. Over half of our investors have investment experience with some having never invested before. “

Swiss private bank Credit Suisse says by 2020 millennials will form 50% of the global work force. French-based BNP Paribas Wealth Management expects this figure to reach 75% by 2025.

Therefore, it may come as no surprise that some wealth managers have taken a number of measures to understand millennials’ investment preferences.

Credit Suisse has been a partner for the Young Investors Organisation (YIO)- a global community of over 1300 future leaders from influential families in 55 -countries since 2005.

It provides peer-to-peer networking and investment opportunities.

Credit Suisse’s CEO of International Wealth Management Iqbal Khan, says: “Our close interaction with the YIO helps the bank understand the challenges these millennials face and to provide targeted solutions for their own personal growth, that of their family or the broader community.

He continues: “We regularly use the YIO as a sounding board and survey their needs, whether this is in terms of developing smart content digital solutions or ensuring we are providing investment solutions that are aligned with millennials’ values.”

The bank launched the Supertrends report- five long-term thematic investment themes- that incorporated the topics they value from an investment standpoint.

Khan says: “Based on findings about their preferences we ‘plugged in’ the themes that they value from an investment standpoint.”

BNP Paribas also ran a “Global Entrepreneur Report” since four years that studies the impact of “Millennipreneurs- HNW entrepreneurs aged under 35.

Kleinwort Hambros hosts a number of dedicated next generation programmes that seek to strengthen relationships with individuals under the age of 35.

Rothery comments: “This programme covers existing clients, children of existing clients and high potential prospects connecting them with each other and the appropriate network of professional advisers.”

Overall, all the private banks polled by PBI say a key finding from their research into mllennials’ investment values is a growing concern for social impact.

Credit Suisse’s Digipigi programme is an example of the bank targeting the extremely young, to make wealth management part of their life from an early age.

As Middleton notes, the digital evolution is picked by all generations, not just millennials.

If the correct relationships are not struck with generation X, then millennials may lose out on inheriting chunks of wealth because of poorly informed decisions among the previous generation.

Private banks should have separate strategies unique to each generation. This customised relationship for each generation will ensure wealth flows in the right direction.