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Cultivating Relationships with the Next Generation of Investors

Millennials, also known as generation Y, are quickly coming of age. A Deloitte study estimates that by 2020 they will represent 40% of the global adult population while holding an estimated aggregated net-worth of $19-$24 trillion. This generation is also poised to receive one of the largest wealth transfers in world history. PricewaterhouseCoopers predicts a massive transfer of wealth in the amount of $30 trillion to Generation X and Millennials in the United States alone. But reducing this younger generation to mere inheritors of wealth would do them an injustice. According to the aforementioned Deloitte study, this generation is more likely to be entrepreneurial. Fifty four percent of them are either planning or have already started their own business.

What Does the Younger Generation Want?

Looking at the propensity of Millennials striking out on their own does not necessarily translate into their willingness to take on risky investments. The 2008 financial crisis has left them with a deep distrust for financial institutions. When communicating with them, it is imperative to stay transparent. To overcome negative attitudes and win their trust, the Deloitte study suggests demonstrating value and transparency by:

  • Maintaining pricing transparency and a clear and fair pricing structure. Performance fees are preferred, while flat fees are distrusted.
  • Providing customized advice, such as in the areas of alternative investments, markets and products.
  • Demonstrating a clear value for each financial product.
  • Providing investment options that align with their social and philosophical values.
  • Acting as a trusted sounding board supporting the investment decision of these often self-directed investors.
  • Offering advanced communications platforms to allow them to easily monitor their investments 24/7.

At first sight, adapting to this new clientele may seem challenging. The changing philosophical and technological paradigm prompts the need for new tools and products. A challenge that can be best addressed with the right partners.

Concentrate on Your Core Competencies

As financial advisors, we should concentrate on what we do best: Getting to know our clients well and helping them to be financially successful and secure. Getting to know a new client takes time and individual attention. Organizing a client event, inviting new clients to a happy hour or attending to a client’s major life milestone represents time well spent. Based on genuine personal interaction, philosophical nuances and life goals are better understood and ongoing investment options can be better aligned. Pair this with outstanding professional knowledge, integrity and level of service and you’ll have an instant winner. As for the technological challenges, they are best overcome by partnering with companies providing pre-existing Fintec tools that can be customized to individual firms’ needs and skill gaps. Equally, finding a distribution partner, who understands your needs and those of your clients, and provides products with the utmost transparency, is essential to developing your business.

When it comes to fee transparency and consumer protection regulations, the European Union is setting a high bar. MIGAM’s investment plans, mutual funds and insurance products (https://migam-global.com/offerings/) are fully compliant with recent EU USCITS, MIFID and IDD regulations.

As always, I am eager to hear what you think. Please reach out at michael.welter@migam-global.com

MIGAM Global is a member of The Mahrberg Group and a leading international provider of premier investment, insurance and family office products and services such as Wealth FriendsWealth InsuringWorld Class Brands Portfolio Strategy, Eljovi Multi-Strategy FundEljovi Indian Arbitrage Fund, and the Family Office Fund. Connect with us on LinkedIn or on Twitter at @GlobalMIGAM.