finance
monthly
Personal Finance. Money. Investing.
Contribute
Newsletter
Corporate

Stuart Lane, CEO at Trade Nation, shares his findings on the trading habits of millennial and Gen Z investors and how they have been influenced by emerging trading platforms.

There’s been a surge in trading interest among the whole population since the start of the coronavirus pandemic, but especially so in millennials and Gen Zs. A survey by E*Trade Financial Corp found that over half of younger investors have traded more frequently, and while many have made notable gains, there have also been some serious losses.

Roughly 46% of millennials and Gen Zs are trading derivatives more frequently — double the average rate. What’s more, 51% say their risk tolerance has increased. This makes for a potentially dangerous combination, especially for amateurs, of whom there are plenty. Robinhood (by far the most popular trading app of millennials and Gen Zs) has said almost half of its new customers this year are first-time traders who, therefore, may not know the risks surrounding complex derivatives such as CFDs. As Trade Nation notes: “CFD trading certainly isn’t straightforward and there’s a lot of confusing terminology and hidden costs involved too. This means it usually isn’t the best way for traders to kick off their journey.”

And in addition to the risks individual traders may be opening themselves up to, experts like Princeton economist Burton G. Malkiel believe that the outlandish trading activities of millennials and Gen Zs are also wreaking havoc on the financial markets.

Why are young people trading more?

The general consensus is that trading has been a great way for the younger generations to fill extra time and deal with the boredom of lockdown. As the founder of RagingBull, Jeff Bishop, told CNBC: “A lot of people are at home and have got more time on their hands. And many, unfortunately, have lost their jobs and are looking for new opportunities. Younger investors are looking for ways to recoup their money.” Furthermore, many Americans have been able to fund their trading activities with their government stimulus checks, with software and data aggregation company Envestnet Yodlee reporting that trading was among the most common uses for the checks in almost every income bracket.

There’s been a surge in trading interest among the whole population since the start of the coronavirus pandemic, but especially so in millennials and Gen Zs.

Apps like Robinhood, eToro and RagingBull have also made trading more accessible for these traders, seeing demand for their services rise by 300%, 220% and 158% in the first quarter of 2020, respectively. And given that the vast majority of millennials and Gen Zs have been using their smartphones more due to the coronavirus outbreak, it’s unsurprising that the time spent on apps like these has also increased.

What are millennials and Gen Zs trading?

The E*Trade survey found that almost half of young investors are trading derivatives more frequently compared to 22% of the general population, while there’s been an especially sharp increase in options trading. What’s more, the surprising nature of their most popular stock picks have stunned, and perhaps even humbled, many Wall Street investors.

"We see a lot of buying activity of specific industries that were impacted by the pandemic," said Robinhood co-founder Vladimir Tenev, as reported by CNN. He singled out shares of airlines, videoconferencing and streaming media companies, and biopharmaceuticals. For example, even though Warren Buffet dumped his airline shares in light of the coronavirus travel restrictions, millennial and Gen Z traders had faith in a recovery. Frank Holmes, CEO of US Global Investors, told CNN that he noticed a surge in interest for the JETS airline ETF in March. Examining Robinhood trends, he learned that plenty of young investors had been buying it after a major dip. The funds' assets went from $34.6 million at the start of March to $615 million by the end of April — a 1600% increase.

“Although a lot of people may say that it’s crazy, it has turned out pretty well,” JJ Kinahan, the chief market strategist at TD Ameritrade, told Bloomberg. “Retail investors for the last few months have been a little bit ahead of the curve. There’s been a lot more perhaps optimism among retail traders around the turnaround than there has been from professionals. This continues to show that.” However, it’s inconclusive whether moves like this are really paying off for younger traders. While some analysts (such as those at Goldman Sachs) claim the stocks of Robinhood investors have outperformed hedge funds and the indices, others have found a negative correlation between these stocks and their returns.

[ymal]

What are the potential problems of this?

Empowered but inexperienced traders

Robinhood has been the app of choice for many millennial and Gen Z traders, and though their ambition to “democratise finance for all” has clearly appealed to this market, it also means that many amateurs have jumped into trading without any experience and gone on to make grave mistakes.

“Robinhood has gamified investing. Trading is now so simple that it can be easy to make impulsive decisions,” one millennial investor told Financial Times writer Siddarth Shrikanth, adding that they immensely regretted the progressively riskier trades they had made during lockdown. Shrinkanth noted that while Robinhood doesn’t provide investment advice, it does “little to deter poor decisions”. For example, almost 200,000 users were holding very complex United States Oil ETFs in the days after it crashed in April. “Why were younger investors drawn into volatile commodity tracker funds, despite repeated warnings from regulators that these risky products were unsuitable for retail investors?” he questioned.

Many millennials and Gen Zs are diving into trading complicated financial instruments without fully understanding the risks. And as well as the potential for devastating losses, this can also come at a tragic human cost. Alex Kearns, a 20-year-old Robinhood trader died by suicide after seeing an unexpected $730,000 negative balance on his account, which he didn’t understand and may have only been temporary.

Many millennials and Gen Zs are diving into trading complicated financial instruments without fully understanding the risks.

Volatile markets

In addition to the potential problems for individual millennial and Gen Z traders, it’s also thought that their activities may be having a significant impact on the markets. For example, having filed for bankruptcy in May, Hertz shares had surged 800% just a few weeks later, with this being one of the most popular Robinhood stocks. Stocks like these may be rallying because of the sheer number of users on the platform — there were more than 160,000 Robinhood investors who owned Hertz stock as of 17 June.

That said, not everyone believes millennial and Gen Z traders are responsible for inflated stock prices. “In June, Barclays published a study of moves in the S&P 500 and positions taken by ‘Robinhooders’,” explained The Telegraph’s Garry White. “It concluded that retail investors speculating in stocks are not responsible for the market’s rally and the top picks of the app’s users tended to underperform, and moves in the S&P 500 were independent of the positions taken on these apps.” He also concluded that while many Robinhood users may see big gains, ultimately: “this strategy needs a lot of attention to follow market moves and it seems inevitable that most will eventually lose money”.

Karoline Gore shares her thoughts on the evolution of fintech in insurance with Finance Monthly.

The lockdown restrictions imposed in the UK this year have seen the adoption of fintech increase exponentially, according to a survey commissioned by AltFi. The insurance sector has been faced with strong competition in recent times as a number of other industries have started to offer financial solutions that can rival traditional insurance. Not only is the healthcare industry offering ‘medical memberships’ that eliminate the need for insurance, but banks are also quicker at providing loans to help remedy financial damages. It is for these reasons, among others, that operators within the insurance sector have to ensure that they have an advantage over their competition. With the aid of fintech, this goal becomes significantly easier to achieve.

Apps and digital platforms appeal to a younger clientele

As of 2018, Millennials enjoyed a greater spending power than Baby Boomers. Tapping into this segment of the market can be very fruitful as Millennials can provide business for a significantly longer period of time than older generations.  Fintech can make insurance offerings increasingly appealing to a younger, more tech-focused client base. Smartphone applications can be designed with businesses, their clients, or both in mind and can streamline traditional insurance processes considerably. Popular features of mobile applications include a policy overview section, premium calculator, and payment processing area. Many apps as well as dedicated websites also provide clients with a range of relevant reviews. If you are looking at taking out car or home appliance insurance, for instance, reviews can cover aspects such as premiums, service fees, and even cancellation policies.

Machine learning improves data utilisation

Machine learning, which is classified as a type of AI, is another form of fintech which is greatly transforming the insurance industry as we know it. In essence, it is a technology that makes it possible for a machine to ‘learn and adapt’ over a period of time. Typically, insurance operators collect substantial amounts of data on an ongoing basis. Unfortunately, only approximately 10% of the data collected is adequately utilised, rendering it almost useless to the business. Thanks to machine learning, insurance companies can put the collected data to better use. It can be used in a number of ways including fraud detection, risk modelling, underwriting, and demand modelling.

[ymal]

Niche products become more prevalent

Apart from smartphone applications and machine learning, there is a range of other emerging fintech solutions such as telematics, big data, and comparators that are influencing insurance in numerous ways. Thanks to these technologies, insurance companies are becoming more adept at offering niche products (that more traditional insurers won’t touch) to their clients. A good example of this is London-based Bought by Mary, who made it possible for clients with underlying medical conditions such as cancer to obtain travel insurance. Similarly, a partnership between a leading worship centre insurer in the USA and another entity resulted in the creation of an insurance product that made provision for the protection against frozen pipe leaks in low-tenure buildings.

Fintech has had a great impact on the insurance industry. Apart from improving customer service, fintech can also aid in new customer acquisition while saving the company a significant amount of money.

In particular, limited-edition trainers have a huge appeal across the world, with people willing to camp outside of stores to pick up a particularly lucrative pair.

This highlights that despite the stereotype of the younger generation being frivolous with their money, it seems they are actually one of the savviest generations when it comes to turning a profit on their own. While they are hesitant to invest in stocks, millennials and generation Z are tapping into the hyper-short-term investment of fashion and beauty.

1. Clothes

Although the initial purchase is an investment, with many resellers spending hundreds of pounds or more on such a venture, but the resale of these goods can certainly turn a profit. It also taps effectively into the Instagram world we’re living in too. Sellers often combine their shop platforms with their social media accounts to merge both modelling and selling the items.

There are so many stories about how entrepreneurial millennials are sniffing out limited edition items from the most popular brands, such as Supreme, during their famous limited edition ‘drops’, then rapidly reselling them. Perhaps one of the reasons why the younger generations are turning more to side-hustles and reselling as forms of investment is that the turnover is incredibly fast thanks to apps like Depop.

2. Shoes

Arguably the biggest market in reselling is that of sneakers and trainers. Much like clothing, the main draw here is in limited edition shoes — but the sneakerhead culture is not anything new. In fact, it began nearly 30 years ago, though it’s enjoyed a huge resurgence in the last few years.

The most sought-after trainers tend to be either limited edition silver trainers or classic men’s white trainers for that much-loved vintage style. People are willing to set up camp outside a store before a particularly hyped drop of limited-edition trainers, in order to grab them at retail price, then sell it on for much higher prices.

Some might seek to resell the items quickly, but there’s certainly a case to be made for popping a brand new pair of limited edition trainers away for a few years before reselling in hopes that their much-hyped status will only increase that price tag as the years roll on.

3. Art flipping

According to Business Insider, rich millennials are snapping up art as financial assets rather than as part of a potential collection — 85 per cent of millennials purchasing artworks say they are aiming to sell in the next year.

Buying art with the intention of selling it on quickly is known as art flipping, and it’s something of a controversial subject in the art world. However, there are some who consider the process of art flipping as a potentially devaluing practice that harms the artist and their work highlighting that this investment isn’t perhaps for everyone.

The process can also seem more logical than artistic too, as many such purchases are made purely on the work’s monetary value. But, just like with clothing and trainers, the piece’s social media hype can also spur rich millennials to part with their cash in a hopes of a quick resale profit — Instagram has been highlighted by Adweek as a viable platform for creating social media adoration for artists.

Sources:

https://www.sofi.com/blog/millennial-investing-trends/

https://www.adweek.com/digital/influencing-the-art-market-millennial-collectors-social-media-and-ecommerce/

https://www.businessinsider.com/rich-millennials-investing-art-flipping-build-wealth-2019-4?r=US&IR=T

https://www.standard.co.uk/fashion/should-you-be-investing-in-sneakers-a4014486.html

https://www.theguardian.com/fashion/2017/oct/23/teens-selling-online-depop-ebay

Here Sarah Jackson, Director at Equiniti Credit Services, reveals some surprising stats about millennials’ attitudes to credit and explores with Finance Monthly what it all means for lenders targeting this demographic.

According to Equiniti Credit Service’s latest UK research report ‘A three part harmony: how regulation, data and CX are evolving consumer attitudes to credit’, despite millennial borrowing increasing annually by a healthy 8%, three fifths of this age group will still only consider borrowing from a traditional, well-established lender, or one that they had dealt with before.

That’s weird

Right. Particularly when it’s clear that alternative lending is gaining traction across other age groups and showing strong overall growth of 15% in 2018. The same report revealed that some 62% of all UK consumers would consider alternative sources of credit (I.e. a non-bank, such as a retailer or car finance provider) the next time they apply for a loan. While consideration does not equal action, the figures about take-up also support the trend: over a quarter of consumers who borrowed over £1000 in the last year did, in fact, use an alternative lender over a traditional high street bank.

If both millennial borrowing and alternative lending are on the up, why is there a disconnect between the two?

So, while non-traditional lenders are not yet competing with banks in loan volumes, they have certainly established themselves within the market. Which begs a question: if both millennial borrowing and alternative lending are on the up, why is there a disconnect between the two?

Customer inexperience

The story, as usual, lies in the data. Although 70% of UK consumers are comfortable completing loan application processes digitally, this figure drops to 57% for millennials specifically. Considering this age group’s well documented digital literacy, this can only be chalked up to financial inexperience. Older generations have not only had more time to become comfortable with the credit processes involved with a loan application, but most have also had more opportunity. External factors play a big part here too. House prices are such that for many millennials, unlike previous generations, the prospect of buying a house and applying for a mortgage at a relatively young age doesn’t even feature on the radar. As such, this group has less exposure to credit processes.

Financial inexperience creates a need for more careful guidance and reassurance. This likely explains why over half (58%) of millennials would only consider borrowing from well-known or previously used lenders.

A helping hand

For lenders, this is both a problem and a huge opportunity. With many millennials now in their mid-thirties, their collective buying power is set to increase substantially over the next decade, making this an increasingly lucrative target market.

That this knowledge gap exists is a chance for the smartest non-traditional credit providers to differentiate themselves as genuine and credible sources of information and guidance for these nervy borrowers.

A great user experience (UX) will undoubtedly help, but will need to be far more than a facility for fast and convenient access to credit.

A great user experience (UX) will undoubtedly help, but will need to be far more than a facility for fast and convenient access to credit. This notion is given further weight by the same report which indicates that one in seven applicants cite clarity of the product’s documentation as the most important factor when deciding between lenders. Persuasive and confidence inspiring UX goes far beyond origination – it must resonate throughout the entire loan lifecycle.

To successfully target millennials, this means balancing investment in a slick digital user interface and the development of clear and simple documentation. Since this group values one-to-one guidance, the contact centre will be a key battleground for business. Here, engaging a specialist outsourcing partner may well be the way to go. These providers are trained and skilled in supporting the kind of dialogue that younger generations need to confidently apply for credit.

Below, Harpreet Singh, Executive Director at Brickendon, delves into some case studies and examples that point towards an evolving workplace, remarking on the financial services sectors and its need to conform or adapt.

In November 2018, tens of thousands of Google employees conducted a worldwide walkout targeting workplace culture less than a year after the internet giant topped Fortune magazine’s list of best companies to work for the sixth year running. The protestors’ main issue was how the company was treating women, but this wasn’t their only concern.

Following the protests, media reports cited Google saying it would increase transparency and improve its harassment policies, but it shouldn’t have taken a revolt of this scale for the issues to be acknowledged. Jose Mourinho, former manager of Manchester United, who was unceremoniously sacked in December, may have the answer to Google’s problems.

Speaking to the media in January, Mourinho, one of the most successful football managers of the last two decades, said: “Nowadays you have to be very smart in the way you read your players”. He then went on to compare current players with players from previous generations and spoke about the increased need to have the right structure in the club to support the players and the manager. Like football, employee demographics in the corporate world have changed significantly over the past decade. According to a recent study by Deloitte, 75% of the global workforce will be millennials by 2025. And therein lies the problem. In the same way as Mourinho believed Manchester United was not reading its players correctly, neither, if recent events are taken into account, are many businesses.

The expectation of flexibility is neither misplaced nor impossible

In addition to having been born and grown up in an online age, there are several characteristics that differentiate millennials from previous generations. Whilst they consider themselves equally as hardworking and as ambitious, if not more so, than generation x and baby boomers, they also require more flexibility, faster results and care more about their personal well-being. According to a report in US news magazine INC., more than half of all millennial workers would like the option to work remotely, while up to 87% want to work on their own schedules.

They also perceive themselves to be more socially aware and eco-friendly and expect these traits from their employers too. Luckily, with the significant improvements in technology over the past decade, this expectation is neither misplaced nor impossible to achieve, as long as employers are prepared to innovate.

Technological improvements make remote working an easy option

Take flexibility, eco-friendliness and well-being for example. With massive improvements in communication-related technology, it is now possible to work remotely without any loss of productivity. Providing flexible working options not only reduces real-estate costs and lowers the firm’s carbon footprint but can also help increase employee motivation.

So, if done correctly, one single action or statement, such as allowing employees to start work earlier or later, or to take longer lunch breaks to facilitate participation in sporting activities, can lead to a chain of events that significantly improves the attractiveness of an employer.

But, the reverse is also true. What if a telecommuting employee needs to come into the office for a face-to-face meeting and realises that he/she doesn’t have a desk to work from? The obvious impact is a decrease in efficiency. However, research shows that not knowing whether you have a desk space can also lead to lack of motivation and stress and can in turn, have a serious impact on an employee’s overall well-being. In addition, it can create an environment of unhealthy competition due to a lack of information, in this case, related to desk space and employee whereabouts. Unlike employees from previous generations, millennials don’t tend to feel the same connection to their company and as a result will not stay somewhere they are not happy.

It’s all about work-life balance

As a result, it may be worth managers considering the way in which a flexible work schedule provides a stronger sense of work-life balance – a quality that is reported to attract millennial employees to a workplace in droves and keep them happier for longer than the two-year stint that has become the norm.

It may be worth managers considering the way in which a flexible work schedule provides a stronger sense of work-life balance.

Typically, desk space is the responsibility of real-estate management teams and doesn’t list as a top priority for senior operational managers. Desk allocations are usually managed on spreadsheets or similar static data-storage tools, which don’t allow for the constant monitoring required for effective desk-space allocation. Technology can again rectify this situation, with tools (such as HotDeskPlus, a new workplace optimisation tool and app powered by Brickendon Digital) that use mobile apps, sensors and QR codes to allow employees to view, reserve and check-in-and-out of specific desk spaces at a specific time.

Millennials may require more recognition and faster routes to promotion

Equally important is to foresee the problems that may arise as time evolves and millennials move through the ranks and take up senior positions. They may require more recognition and therefore faster routes to promotion. At the same time, incoming employees may prefer a more informal and non-hierarchical structure. This will require a shift in the organisational model and a willingness to embrace change in a way not seen before.

A quick look at the last couple of years reveals that many CEOs were either asked to leave their positions or forced to deal with discontented employees. These non-unionised breeds of relatively new organisations, such as Google, Microsoft and Uber, were expected to be torch bearers for the next generation of working practices, but their actions have largely been reactive. There is no doubt that what is thought to be an isolated incident can very quickly gain momentum and become a global phenomenon.

So, when it comes to millennials, you may want to count (and listen to) your chickens before they tweet, otherwise they may leave your roost sooner than you expect.

Founder, Chairman and Co-Chief Investment Officer of Bridgewater Associates Ray Dalio talks to Julia La Roche in 2018 of Yahoo Finance about the value of savings and investing.

This is the surprising finding of a new global survey carried out by deVere Group.

Those in Generation Y (24-38 years old) who started seeking financial advice from deVere in 2018 on average saved 19 per cent of their income for their retirement.

Those in Generation X (39-53-year olds) put aside 16 per cent on average of their income for retirement; and the Baby Boomers (54-74 years old) 35 per cent.

More than 660 people participated in the survey in the UK, Europe, Africa, Asia and the U.S. amongst new clients taken on by deVere throughout last year.

Of the survey, Nigel Green, founder and CEO of deVere Group, comments: “The results of the saving survey are both encouraging and alarming.

“It is encouraging that millennials – often falsely stereotyped for their sense of entitlement and for being content to pay for overpriced coffees and smashed avocado on toast - seem to be better at saving and more fiscally responsible than many would have thought.

“Despite their reputation for purely living for today, the poll shows that they are saving for their retirement pretty impressively.  Putting aside nearly a fifth of their income already is highly commendable, especially when many can be expected not to be yet at the peak of their earning power.”

He continues: “What is alarming, however, is that Gen X, and to an extent Gen Z, workers are not saving nearly enough in order to be able to have a comparable lifestyle in retirement.  And by the virtue of being older, they have less time to build wealth before leaving work.

"It’s perhaps particularly concerning because we’re living longer, meaning the money we accumulate has to last longer; in the future, it’s unlikely that governments will be in a position to support older people like they have done for previous generations; there is a looming health and social care crisis; as well growing deficits in company pension schemes.

“In addition, it has to be considered that there might not be the option available to work longer if necessary due to ill health, lack of career opportunities, or because of the need to look after sick or elderly relatives.”

Mr Green goes on to say: “We need to revitalise the savings culture of Gen X especially. Otherwise many of today’s working population are going to reach retirement and find they have to downgrade their lifestyle and/or continue working longer than they had expected and hoped, due to a lack of savings.”

The deVere CEO concludes: “It’s never too late to start saving for your future, but of course the earlier you begin, the easier it will be to reach your long-term objectives.  As such, the millennials surveyed deserve huge credit.

“There’s a plethora of financial planning solutions that help you achieve financial freedom in retirement at whatever age you are.”

(Source: deVere Group)

New research from MoneySuperMarket reveals that, amongst younger age groups, saving for a house is a far higher priority than saving for retirement.

Homes are by far the most important savings point for millennials, with 23% of 18 – 34 year olds saying that they are saving for a house above anything else. Those saving for houses are more prevalent among the younger side of the age group – as the figure saving money towards their home rises to 39% among 18-24 year olds.

Only 4%, however, say their primary savings concern is retirement, and 33% of millennials don’t have a pension pot in place. Even those who do aren’t keeping an eye on it, as a further 53% don’t know how much is in their pot.

Many people in the UK haven’t even started thinking about saving for when they stop working. Most have no idea how much they need to save to live a comfortable life in the future, underestimating the cost of retirement by £169,000 on average. However, whilst home ownership can seem like a pipe dream for many young people in the UK, the fact that a house was by far the most prioritised aspect to save for amongst the younger age groups shows that many are still hopeful they can get their foot on the housing ladder.

Using consumer research, MoneySuperMarket has built an interactive tool that people can use to see how prepared they are compared to their peers, with results tailored by the user’s age and gender.

(Source: MoneySuperMarket)

This ground-breaking reform changed previously rigid rules to make the financial services sector more competitive and focused on the customer. 

Cloud-based digital banks have taken advantage of this initiative by offering better services to customers, as 8 out of 10 Millennials say they would switch banks for personalised service. Such fintech players and challenger banks now account for 20 per cent of the banking and payments market in Europe.

However, acquiring these new customers is not enough for digital banks to stay competitive, according to customer relationship marketing experts at the customer data platform Optimove. Challenger banks need to find new and personalised marketing strategies to keep brand-agnostic customers loyal – or else they will be made irrelevant by other agile providers with better product offerings.

Roni Cohen, Director of Data Science at Optimove, comments:  “In the age of Open Banking, the best way for these agile technology driven banks to effectively implement personalisation is to make the most of the available customer data, which is now also available to their competitors.

“A customer-centric approach using advanced technologies can help create a long-term competitive advantage. This can be done by looking at customer data to find out what value means to each person, and communicating with customers in an emotionally intelligent way to create value for each and every customer. By using AI, banks’ marketers can gain actionable insights and build effective campaigns and strategies that will target customers at the right time, the right channel and with the right offer for a fully personalized experience.”

Roni concludes: “As consumers see an increasingly personalised experience, challenger banks will be able to distinguish their brands with promotions and rewards tailored to each individual – just like retailers do.”

(Source: Optimove)

As the UK experiences a widening generational wealth gap, research from credit comparison experts TotallyMoney, uncovers how much different generations are spending or overspending - along with some tips so you can save for that three month trip to Thailand in no time.

61% of millennials feel like they overspend on entertainment - including nights out and trips to the cinema.

Where Do Millennials Overspend?

While the average Brit puts away £183.50 into savings each month, the research revealed millennials (born between 1977 and 1995) save less at around £176 a month. Millennials are also the most likely to run out of money before payday - with 24% saying this is the case, and the majority of these blaming it on their expensive spending habits rather than an overall lack of funds.

The survey also revealed 61% of millennials feel like they overspend on entertainment - including nights out and trips to the cinema, with a further 34% believing they spend too much on eating out.

Tips and Tricks:

We’re pretty sure you’ve thought of ways to save money - but here are a few others just in case you haven’t thought about it, or that final reminder to get you started:

Henry Keegan from TotallyMoney commented: “Property is certainly more expensive than ever, and interest rates are notably low at the moment – both of which make it hard for younger people to be as well off as their parents or grandparents

“But there is a noticeable trend that younger people might not be acting with a clear view towards saving for the future. Whether it’s higher spending on unnecessary purchases or an approach to spending which means that they run out of money when they need it, their spending habits may not always be in their best interests.

“We encourage everyone to do research, keep a budget, and use helpful tools to ensure they’re making smart financial decisions.”

(Source: TotallyMoney)

More often than not, you will hear stories in the news of Millennials complaining that their generation is hard done by, but can you really blame them? Unlike today’s baby-boomers or Generation X, Millennials are saddled with an uncertain economic future and have the tightest cash flow compared to previous generations all because of the sheer complexity of modern life. This is a worrying fact and according to Christer Holloman, CEO & Co-founder of Divido, it’s time we cut Millennials some slack.

The burden of mounting student debt combined with an unrelenting affordable housing crisis and the fear of another credit crunch has made this generation particularly wary about their economic futures. This is translating into Millennials also becoming averse to borrowing from banks and sceptical about the financial services industry as a whole. Debt-conscious Millennials now favour prepaid and debit cards over the credit variety. This caution has two side-effects. Firstly, in a world governed by credit scores, it diminishes—some would say ironically— their potential to improve their credit scores and show that they can be trusted with credit and loans. Secondly, it means that those high-ticket, quality purchases are often deferred unnecessarily.

It’s fair to say that as a generation, Millennials suffer from perhaps the largest misconception about their spending habits, often criticised for being less money-savvy to other demographics. However recent research from Deloitte suggests Millennials aren’t as impulsive and money-reckless as the media makes them out to be. They are most likely, for example, to buy luxury, high-end goods when they receive extra income (such as a bonus) to avoid accruing debt. Because of this, it is crucial that businesses selling expensive aspirational goods targeted at Millennials, adjust their payment models, allowing consumers more flexibility and choice- choice that doesn’t stop abruptly at the checkout. It’s clear that this new wave of customer is not prepared to load up credit cards, meaning that if these businesses don’t change, their sales will become more sporadic.

Rarely is this negative attitude towards credit and debt addressed by a more convenient way to pay. This is curious given that Millennials now make up a quarter of the UK population, emphasising just how valuable offering finance options to this age group can be.

Millennials value convenience, flexibility and honesty from retailers and banks; all qualities which the main credit card providers are not renowned for. Paying by finance empowers customers by giving them the choice and flexibility that they crave from businesses. Allowing consumers to take a stronger control of their finances by spreading out their costs in monthly instalments at 0% interest, not only increases loyalty but makes those previously out-of-reach purchases more of a reality by removing the initial intimidating price tag. If more retailers adopted this system, the Millennial generation has a chance of becoming the next premium consumer base.

There has been a revolution in subscription payments for digital services over the past five to ten years. From Netflix to Spotify and even Nespresso, people are now very happy to spread out and manage their costs as they earn – it’s becoming the new norm. It is a model both the high street and online retailers should look to emulate in order to reach this influential generation and stay competitive.

The subscription model is now being rolled out to attract more affluent audiences with higher-ticket items such as cars as seen in Jaguar Land Rover’s recent launch of Carpe. Bitesize regular payment options are another way retailers can keep their customers loyal for longer by reassuring them that they are getting a good deal with the best long-term gains.

It’s clear that Millennials’ affinity for technology and new ways of doing things is reshaping the retail sector and its offerings. Having a strong brand is no longer good enough to lock in a sale with them. Retailers now need to work harder, tap into the financial psyche and purchasing mindset of Millennials to give them the flexibility and choice to own their payment plans. Not only will this ensure they’re not spending beyond their means, but it also allows them to buy the quality, higher-end products they desire then and there.

Pensions are a crucial part of life but a dreaded concept for many millennials. However, saving for a pension may not be as complicated or as demanding as you think. Here, Paul Farrugia, Partner and Chartered Financial Planner at Equilibrium Asset Management, explains how easy it can be to start saving into a pension today.

About Finance Monthly

Universal Media logo
Finance Monthly is a comprehensive website tailored for individuals seeking insights into the world of consumer finance and money management. It offers news, commentary, and in-depth analysis on topics crucial to personal financial management and decision-making. Whether you're interested in budgeting, investing, or understanding market trends, Finance Monthly provides valuable information to help you navigate the financial aspects of everyday life.
© 2024 Finance Monthly - All Rights Reserved.
News Illustration

Get our free monthly FM email

Subscribe to Finance Monthly and Get the Latest Finance News, Opinion and Insight Direct to you every month.
chevron-right-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram