How to Engage the New Generation of Investors

As Generation X hits its prime earning years, and millennials enter into the workforce, they’re taking center stage as the new generation of investors. Technology has not only altered the way individuals shop for products and services but also the way they interact with the companies who are selling these products and services.

This breed of investors is tech-savvy and self-directed, seeks work-life balance, values freedom and responsibility in the workplace, and dislikes micromanagement. As many of them approach the middle of their working careers and potential peak earning years, they’re becoming increasingly relevant for banks and other financial services institutions. They even have a label, mass affluent, due to their extensive presence and financial wealth.

The banking behaviors of mass affluent customers are different from pure retail banking customers. They request more information, look for safe savings and investment products, show interest in new technologies and digital banking, and are interested in banking across regions.

Moreover, they take a more financially proactive role in societal wellness, considering that they’re twice as likely as other generations to invest in companies with a stated social or environmental impact.

Source: Sustainable Signals: The Individual Investor Perspective, Morgan Stanley

The next generation of investors is moving away from the old ROI concept in favor of a more tangible approach, not only focusing on financial returns but also giving value to their time and trust. They don’t expect merely a financial return, as they also have a focus on socially responsible investing and want to know that their investments are helping to generate social and environmental good.

Source: Sustainable Signals: The Individual Investor Perspective, Morgan Stanley

Engaging the mass affluent population has proven difficult. Banks are still not able to adequately serve them, as this cohort shares characteristics with both typical consumer banking clients as well as high net worth individuals (HNWIs), although their needs more closely resemble those of HNWIs. So how can banks attract this high-potential segment? What do mass the affluent need to become loyal banking customers?

To better serve these customers, banks should start developing products and/or services that consider the following:

Anytime, anywhere

Generation X and millennials tend to perceive themselves as very busy, and consequently want financial advisors who can save them time. They appreciate direct contact with their relationship manager, and easy access to their products and services through virtual channels outside of office hours.

The point is to create a client-centric service model, based on better accessibility through digital and physical channels and tailored interactions with the relationship manager. The mass affluent expect their bank to be proactive in assessing their financial situation, to meet their needs at any time.

No one-size-fits-all offering

Younger clients look for individualized attention from their advisors, setting up face-to-face meetings when needed, and leveraging technology to provide personalized investment offerings.

To set themselves apart, banks should leverage advanced analytics. They can then collect insights on mass affluent transactional behavior, and use the data to identify the most suitable clients, offering them bespoke digital products and services. This will help banks differentiate themselves from competitors that provide more general, one-size-fits-all offerings.

Automation is acceptable as long as it’s personal. Customers want information delivered via automation to be based on their behaviors, lifestyles, and financial goals — preferably, in real time. They want content using calculators, dashboards, and other tools rather than engaging in a personal discussion every time they want advice.

Reliability breeds loyalty

Millennials and Generation X tend to have a negative perception of the financial services industry, and do not fully trust their advisors. Many of them are savers who didn’t inherit their wealth, and want to invest for the future; they care about their money, and want their bank to understand them and be transparent.

Empathy and trust

The mass affluent are currently in an in-between area. They’re not considered HNWIs since they aren’t part of the million-dollar club; they’re savers who didn’t inherit their wealth, and want to invest for the future. They care about their money, and want their banks to show genuine interest and understanding of their goals and interests, and help them achieve those goals.

A trusted relationship between the bank and the client is the critical asset, even more than the product itself. Integrity, transparency, and personal services create intimacy to secure mass affluents’ loyalty.