Banks Devise New Ways to Tailor Services for Millennials
NEW YORK -- Millennials are more likely than previous generations to turn to social media to make their financial decisions, relying on smartphones and tablets, and banks need to adjust their structures to accommodate -- and profit from -- that trend.
Many of the biggest names in marketing and finance are coming together to discuss how to attract and convert the coveted millennial demographic, most recently at the annual LinkedIn FinanceConnect conference in New York.
%VIRTUAL-pullquote-Frankly, if you solve for millennials, you solve for everybody.%"Our whole approach is: How do you show up in a useful way to an audience that's very demanding and very smart?" said Denise Karkos, chief marketing officer at TD Ameritrade (AMTD). "Frankly, if you solve for millennials, you solve for everybody."
About half of millennials prefer to do independent research before contacting a financial adviser, according to a LinkedIn (LNKD) and Ipsos study published last week. That compares to 42 percent of those surveyed in Generation X. And many banks and financial institutions are increasingly turning to social media to educate, advertise and establish trust.
"One in five millennials think that their social networks will be the hub of all their financial decisions," said Donna Sabino, senior vice president of Ipsos.
Merrill Lynch's head of wealth management, John Thiel, has maintained an active LinkedIn blog on financial advice. The latest series on this is titled, "The Test I'll Never Forget," and centers on ways to avert career blunders. "I'm very involved with it," he said. "It's my message. It's my point of view."
In the wake of the financial crisis and ensuing bailouts, millennials have developed a general distrust of Wall Street, yet a strong affinity for social media, according to Marty Willis, chief marketing officer at OppenheimerFunds. "Technology is a very trusted industry. It's more trusted than financial services," she said.
Millennials also are more likely to seek personal finance decisions on social media, according to the study. And while they seem to be pessimistic on the outlook for established finance companies, they are bullish on the economy, with 67 percent having faith in the "American Dream."
Amid a growing trend towards making financial decisions and transactions on mobile devices, banks need to find ways to tailor their services to fend off a new contingent of digital competitors, according to Laura Desmond, CEO of Starcom MediaVest Group.
"Today's millennial expects to do everything off the mobile phone, from Uber to shifting money to making decisions about financial management," she said.
Banks are also eyeing the rise of mobile-payment apps, which allow customers to make transactions at an increasing number of outlets. "Whether it's Google, Samsung or Apple Pay, we have to be there." said Leslie Gillin, chief marketing officer of Citi's (C) consumer banking division.
A new form of competition has also emerged as online brokerages now offer a variety of services with little to none of the traditional fees, collecting revenue mostly off of non-invested cash sitting in customer accounts. On Thursday, Robinhood, a Palo Alto, California-based online brokerage that doesn't charge commission fees, announced a $50 million round of financing for a $65 million total.
"Since many of the incumbents are publicly-traded and the commissions represent a substantial portion of their revenue, eliminating this revenue source could be detrimental" to their business," Robinhood's head of communications said in an email. "Of course, we would like to see commissions across the board come as close to zero as possible, but only time will tell."
Hardeep Walia, CEO of Motif Investing, emphasized the notion that technology will make life easier for customers, and traditional service fees will need to be brought down or eliminated.
"Friction is going to go to zero, transaction fees are going to zero," he said. "And the big guys are going to have to compete."