The Truth about Generation X and Y

Tim Hewson, National Partnership Manager, ING Direct presents “The truth about Gen X and Gen Y”

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Hello everybody and welcome to today’s technology collective webinar “The truth about Generation X & Y” by Tim Huston from ING Direct. Thanks for joining us today and now I’ll hand over to Tim Houston.

Great thanks Bethany and thanks everybody for joining us over the course of the next 20 to 30 minutes or so and I’m going to take us through some of the key findings from a report that ING did recently with Rice Warna titled “The truth about Gen X and Gen Y” and ultimately the research that we conducted was looking at the attitude of Gen X and Gen Y specifically in the areas of Superannuation advise and Retirement and probably the more interesting question is why Gen X and Gen Y are a subset of the broader demographics that we wanted to look at and importantly this is a group of customers that ING Brands is resonated most strongly with. I will probably describe this subset as the custodians of our brand. They essentially own it. They are our greatest advocates. We wanted to understand the advice superannuation retirement needs of this particular segment in more detail and in particular we’re getting a lot of question from advisors nationally in terms of issues and opportunities for advice around this particular segment from our partners given that our brand is so strong in this area.

Before I kick-off maybe a little bit of information on the report itself to provide some context and clarity of the research conducted by Rice Warner in the January issue and in terms of the definition of Gen X and Gen Y because you can find they sometimes to define them a bit differently. Gen X refers to those born between 1966 to 1980 and then Gen Y between 1981 – 2000. So I can give a little bit of context to the ages of the audience we’re talking to it’s really just the five key areas that I want to focus on today and then throughout the course looking at these areas. I want to make sure that we touch on some of the opportunities for you as advisors in terms of looking at this particular segment.

So we’ll start off with a bit of a little snapshot around you know how big this Gen X and Gen Y segment is, with a big dive into the attitudes of Gen X and Gen Y particular around advice to superannuation and retirement. We will have a look at what’s stopping them and what are the barriers to advice and what they expect from advisers. We will then take a more detailed look at how they want advice delivered, how much they are prepared to pay to for it. For you as advisors that might have an interest in this particular area of the market whether or not you already have clients demographic or looking to expand some of the services you offer and how do you. Then go about finding them and then applying what they want and how they want it and then we’ll finish up with a bit of a summary what it means for you as advisors.

But I will touch on some of those opportunities throughout as we look at each one of these different segments. Ok, so the value of Gen X and Gen Y – there’s been a couple pieces of research around this particular area and we approximate that the current value of this particular segment is something in the area about $1.4 trillion so as a standalone and you compare that to the size of the superannuation industry more broadly it’s an opportunity segment. In addition to that, we’re all aware of significant changes that are taking place from a shift in demographics or aging demographics and it’s expected that a further two point four trillion is expected to be handed down to the Gen X and Gen Y segments over the course of the next 30 year, in total about $3.6 trillion which is a huge market opportunity and why we’re probably getting a lot of advisors asking us about what sort of products and services can I deliver now and how can ING help, but more broadly a segment that from the opportunity said it’s something that if you are going to start to dig into it’s worthwhile having a good look at it.

Now we’re aware of some advice businesses that have already employed advisers specifically to look after these particular segment so we’re going to draw on some of the learnings from their experience as well. Ultimately thinking about these opportunities now might mean actually setting up the bases for providing these business services in the future as well. So here’s the context, this is why it’s so important to us it’s a huge opportunity going forward in terms of subset. So maybe a bit of breakdown snapshot, the not so good news first in terms of looking at this particular segment and their approach to an attitude. About 1 in 20 are currently getting advice which is obviously very different to the for the broader market to the one in five that is that is seeking advice and in particular Gen X by majority have not used an advisor to date and whilst that seems like bad news there is of course the opportunity for at least fifty percent of the Gen X market to be amenable to advance, or have received advice or have had contact with an advisor in the past and look more into that and importantly – you’ve got the areas of Gen X and Gen Y and where they then consult their advice at the moment. This in particular in a parent stranglehold in terms of existing service providers in the finance area, such a next Gen X and Gen Y and breaking that down we see the Gen X is typically more likely to go and see an accountant in terms of looking for a consult where is Gen Y is more likely to go and see an existing service provider and may call their banks as the most likely recipient from a consultant from a consultation point of view.

There is some good news, in terms of approaches to advice, fifty percent of those that we surveyed said that they actually want help, so that from an advice perspective opens up opportunities for advisors in terms of looking at this particular segment. If we dig a little bit deeper into thoughts of Gen X and Gen Y about 75 % are willing to engage in one form or another and then looking at least 35% of Gen Y are willing to delegate all decision making out or outsource all decision making to a financial advisor, so about one-third of of Gen Y are looking to engage with a financial advisor in whole more broadly though I suppose nearly a quarter don’t really see themselves or would describe their approach as being they are DIY in nature and so this opens up again further mindset opportunities to be able to engage or be engaged in the advice process and then nearly a quarter actually of the Gen Y subset think reasonably regularly about their Superannuation which is different to Gen X which is really only looking at the superannuation balance once a year.

So the good news here is that there are subsets within the Gen X and Gen Y that are essentially looking for ideas and opportunities around advice whether in part or whole and at least one-third of Gen Y are amenable to completely outsourcing advice which I think is a great opportunity and a little bit of a myth buster compared to what would probably think of the attitudes of Gen Y towards financial advice and I’ll begin with that point as well. Ok, so what’s actually stopping them from getting advice?. At a very high level they have a lack of knowledge around the advice
process. Economic uncertainty that’s being in play for a number of years now has also prevented them from knowing where to start. They believe it is a very time-consuming process. They think that and their not obviously aware of the time efficacies of engaging with an advisor can actually help them get results. More importantly and this will be a common thread throughout the research is perception around the cost and then the value of advance if you look at what the top 10 reasons are for not seeking advice and a lot of believe that their current situation just doesn’t warrant
actually getting advice at the moment.

So if you clean the slate and say where is the opportunity?. The other opportunity is the two thirds that actually had hurdles that can actually be overcome through positioning or repositioning the packaging arrangement advice services so we’ll dig into those a little bit as well and as mentioned earlier perception of fees and then the value perceived around advice so there are clear indicators that there is an opportunity to better articulate and educate this particular segment around the value advice.

So what does this mean for you as advisors? We’ll work through some of these arguments throughout, but they were highly amenable to simple web content. Make the information about you, the practice, the advisors, the services that you provide clear and easily able to be accessible via a website. They the idea of simple tools and calculators to get them started want to go into the advice process motivated and highly educated so they want to overcome some of those barriers around the lack of knowledge, to do something themselves to begin the process which is both a good thing and a bad thing from an advisors point of view.

There’s a little bit of information, the wrong information, can obviously be dangerous and then more broadly the value of advice and being able to clearly articulate that whether it’s by a website communications collateral or more importantly from a face to face point of view is going to be what obviously helps them overcome some of the hurdles and the barriers to dig into advice and we’ll touch on these in a little more detail throughout because they are reasonably common thread as well. So if we know what’s stopping them, let’s have a look at what they actually want
when it comes to financial advice and I suppose what broken this down into what they want from a short time and a long term point of view and the key triggers for advice is you actually expect – they have purchasing a property and then receiving an inheritance retirement was on the list but it was moving further down the list and something that they didn’t really think about at the present moment which is obviously why they’re not they’re not highly engaged with their Superannuation as well.

But creating financial independence, paying the mortgage and getting advice to help them achieve their savings goals are really short term goals and how can you actually reconstruct cash flow with management tools and scenarios to help them achieve saving for deposit to their first house to then get them to move into the next stage which is looking at their insurance needs before digging into retirement looking at superannuation and longer-term paying off the mortgage
is obviously a key driver for these particular segments and then looking at building well for

So what can you do?. Look at ways to bridge the gap between fixing some of those short term savings based goals and objectives and some of the longer term wealth cash in or wealth retirement strategies that you’ve already got in place. So that might be adapting what you’ve got for those older demographic segments and trying to break it down. Tools and calculators and having those online is obviously something that they want to engage with. Keep the messaging nice, clear, sharp and simple and they were highly amenable to a package style solution. So here scalable advice is obviously from a last stage of the trigger based or event perspective like purchasing property or all or inheriting money from parents allows you to be able to then a package advice solutions.

It starts to also then deal with some of the challenges that this segment has around the cost of advice because it can be broken down or compartmented it makes it more palatable for of these particular groups. Then if we know what they want as customers we need to obviously get an understanding of what they expect from you, the advisor, We know that they are fee sensitive so they want the advice to be affordable. Affordability comes back to “am I getting value for what I’m paying for?” so we get extra value and the value exchange around the advice has been given and the outcome of the value and whilst of touching on this suppose I the outcomes from a performance point of view about fifty percent of them actually expected that their advisor wouldn’t lose them money, 25 percent expect you as advisors to generate more than ten percent per annum, so some pretty aggressive growth targets given current market conditions and then 25 percent just simply expected the value of their money to grow. So if you can wrap the information you are able to provide around your level of expertise, the areas that you focus on for the advice and strategic point of view and build a reputation and then combine that with greater transparency around fees and the range of services that you offer and package those from the service point of view and to get over their affordability value through transparency.

So if we look at what that means and profit marketing strategies, looking at onboarding clients through scalable advice solution and then building on that all the time. I’m not suggesting loss waiting in any way shape or form of this I’ve got a reasonable understanding of how much it costs you guys to actually deliver advice, but I’m just suggesting part compartmentalising and breaking that down. Being clear in terms of intellectual marketing and positioning, what you all offer compared to peers, looking at that from a reputational point of view and focusing on what you have a business to run as a barter and to focus on the areas of expectation and make that development. So for these particular groups, based on what we know they want from the short and long term thoughts and whilst there is an obvious compliance requirements to make fees transparent, bringing those into the conversation upfront especially if you are able to break them down compartmentalise and package them is obviously important and issues like locality are certain less important than being able to be able to show your level of expertise with a passion and that you’re able to add value and bring an affordable advice solution.

So how do they want advice delivered?. This probably one of the big myths that we’ve
busted when actually looking at this particular advice because we’ve got this perception that all Gen Y’s are hanging out on online chat forums, sharing stock tips and behind closed doors, but when it comes to financial advice actually engaging somebody from the consultation point of view eighty percent wanted face to face, which we were obviously quite surprised at. This is probably the one thing that I think as a take away, if you take away anything today it’s probably getting in front of the client as soon as possible and I know this something that you probably do as part of standard of general practice but when you stack that against up what we perceive Gen Y doing in terms of sharing stock tips, or information, or for giving research online if the prevalence of the discussion around automated advice and robot advice they would much prefer to develop a relationship with one on one advice across the table and deal with you as the advisor and a in a trusted face to face relationship basis than take on automated advice.

So there’s an interesting insight in terms of how you build the process for these particular segments by lead generation and a relationship point of view, especially when it comes to personal advice. The other interesting component around how they obviously want to deliver it is if you are going to engage online via automatic advice tools they expected you to be frank. So we will dig a little bit more into the fees and the next slide but the reason this expectation that anything that’s online now is essentially done for free, so if you’re going to give advice online I’m not going to pay for it. It is essentially a take away. So there’s the other opportunity here, they want face to face. It’s going to be the best opportunity to overcome some of those barriers around reputation and experience and being able to pinpoint service packaging.

So get in front of the client as quickly as possible. Deliver a range of solutions that help meet the needs in that transition to those that want to go from an online process into a face-to-face process because there’s obviously a huge discrepancy in terms of the expectations from a pricing point of view. Then if you do need to use online or other automated advice use it as a precursor or a lead mechanism to generate face to face lead which been talking to a lot of groups nationally seems to be that going down the automated advice path is what the key driver is for that particular technology. Ok, fees?. So how much are they willing to pay? The maximum fee that they are willing to pay is $250 and this is looking for all advice for all areas, whether it’s insurance through comprehensive solutions through piecemeal. They have attached this particular threshold as an average across all mediums and across all Gen X and in general there is a perception more broadly in that advice is not really for them, it’s for the wealthy to those that actually have more money and that advice something that I can put off for a period of time and that they don’t actually need it right now.

So finding a way to be able to correct that need and maybe that can be done with tools and information on the website. In terms of what they look at from a robot point of view and the majority of Gen X is not really prepared to pay for robo advice that is something in about 65 percent, but ultimately when it comes back to the understanding of what they’re willing to pay, the most we saw was up to $1000 and that was for Gen X who had substantially higher portfolios, whereas in fact average bank balances somewhere close to $750,000 and that was in terms of their expected balance that’s not necessarily balance at the time. So again, I think the models in terms of what you are able to deliver and how is how they can actually rolled out at the different trigger points different life stages is an important way of breaking down some of those barriers and then being able to deliver solutions to bring some of the Gen X and Gen Y cohort on board there is absolute role here for advisors and the industry terms of educating around the cost of advice, the value of advice and the value of exchange, what it is that they are getting back as part of the client/adviser relationship for the cost of advice and more broadly you know the conversations we’ve had with advisors is there’s a perception that the $250 is obviously unrealistic in terms of what’s being able to be provided now. So it’s about thinking about how scaled advice and building that advice so that building on advice proposition over time can actually lead to creating more value in exchange for that particular client and that the relationship and you know that they want a face to face relationship and there’s a price for that.

In addition to delivering advice is trying to find the trigger points at those at those levels for each type of client to be delivered. Some of you might already be working in these segments so some of this maybe not be new news, some of maybe new news, but in terms of where to find them, we’re asking them you know the questions around when and how are most likely to pick up advice can expect nearly fifty percent of them will be taking on recommendations from family and friends. The children of existing parents are obviously a key source. In fact 51% of them were very likely to seek advice compared to those whose parents were unadvised, which was lower than 9%. So many of you may be already having prospective so if anything it does nothing more than perpetuate that it’s the right method to be able to try to infiltrate the Gen X and Gen Y cohort. Obviously nearly 50% of Gen Y and 35% of Gen X would obviously go online to try to find an advisor in Google, which was their preferred search engine so nothing too unexpected there. In terms of opportunities in terms of attracting faces from a super point of view and we looked at the Superannuation side because they did talk about Supers and retirement as being one of those things that’s a long way away, sometimes too far away, but in looking at top 10 features around Superannuation fees are important as you obviously would expect and returns important, transparency less so, user-friendly website also. When it comes to looking at the balances in and around Super for these cohorts about 32% of Gen X had balances that we’re in the $100,000 range and about half as much for 16 or 17% of Gen X had about S200,000 balances so we start to consider what’s important to them around Superannuation fees are important because they can be returned with has better performance over time and they’re obviously looking for value for their money.

Interestingly when it comes to Super and looking at insurance about 70% don’t have any form of life insurance, so again when we’re looking for triggers and ways to engage Super insurance are a really interesting way to be able to the shortcut conversations and you can add value quite quickly because the majority of Gen Y have at least one and a half funds on average. Gen X about 1.3 to 1.4 funds so consolidation saving of fees and delivering on insurance solution for some of these cohort can be quick means. So what can you do in the areas?. Certainly defined functional website which most of you already have clearly articulating roles, responsibilities and services you provide.

We talked about Superannuation as a starting point and but think about ways that you can actually incentivise age specific referrals from maybe brokers and or accountant based networks and then make sure you build and package your advice solutions to suit them. Talking to brokers and accountants through those package solutions and be a good way to be able to get them to refer business to you for these particular groups.

So just in summary, a few of the opportunities that we touched on. We talked about $3.6 trillion market and it’s obviously a huge market with huge potential. We talked about the appetite that these groups actually have and what they’re calling out to us. They want flexibility, they want valuable advice so it needs to be competitively priced and then they want something which is fundamentally tailored for themselves. Tailored for them to be able to transition through the various life stages and it makes sense because if you think about it anyone using that sort of 30 to 40 age bracket still has 20 to 30 years to go before they retire and then they’ve got 20 to 30 years in the post retirement phase which they need solutions for. So a lot of it is a long way away.
Breaking it down, making it simple and cost effective for them now, while it’s not a focus and certainly put it on the radar. 30% of Gen X and 35% of Gen Y are willing to delegate so there are obviously opportunities there in terms of one third and eventually these segments being open to the idea of in part or in whole outsourcing financial management to advise which is a huge step up from the 25% percent that we actually saw earlier on that are currently engaging advisors, so there is room to close that gap with this particular segment. Although I’m not saying it’s going to be easy, a little bit of elbow grease and hard work and thinking about how you position.

So now those last cycle triggers are actually therefore going to be really important. Making sure it’s accessible, that you’re accessible, packaging the advice solutions, keeping it simple and then more importantly thinking about how you then overcome the inertia and then target some of these customers. We’ve already talked about children of advice clients being more likely. So if it’s a strategy that you’ve already got in place continue to think about how you’re actually packaging advice to those groups and then when it comes to retirement maybe one or two points to the sort of throw in the majority actually plan to retire between 51 – 60 years of ages which would be great if it was at all possible. Even more alarmingly about a third, just over 30%, actually think that they will retire sometime between the ages of the 31 to 40. So we’ve seen a couple things by
way of disconnect in terms of value of advice and how much they are prepared to pay. How soon they actually think they’re going to be able to retire and so I absolutely believe there’s a very clear and valuable role for advisors to be able to play in this particular segment. More importantly when they do look to retire they’re looking for something in the realm of about $1100 per week for a comfortable retirement, which is $250 to $300 dollars more than the current as far as living standard so is it is a huge role again for advisors to be able to play, to be able to reconstruct some of their financial objectives or help reconstruction some of their financial objectives and create a pathway and a journey through package solutions and then most importantly I probably just want to harp on the role that face to face advice plays.

So don’t discount that there’s obviously a lot of information in the market at the moment, online advice, robo advice. A lot of the early discussions around robo advice were how they could actually be used for the younger demographic segments. You’ve probably noticed that that has disappeared, a lot it’s more about lead regeneration and now driving value exchange for broad cohort of all ages. To make sure that the face to face advice is part of the advice life cycle even if you do have and online automatic robo advice solutions as part of the offer. So that’s at a high level. Some of the key take out and findings. Some practical tips in terms of how to tackle inertia and overcome some of the challenges, but also and address the opportunity for Gen X and Gen
Y. If there’s any questions that have come out of today’s session please forward them through to Bethany who will pass them on myself and she’ll make a copy of the presentation available and I’d encourage you to make contact with your ING direct representative in your state so that you can actually get a copy of the report sent through you. Thank you.

Thank you Jim. If anyone has any questions for Tim now feel free to raise your hand or put your question in the question box. In the meantime I’ll be sending out a survey on today’s webinar very shortly. Please ensure you complete it and yet again, if you watched this webinar in a group of people please let me know who they were so I can be sure to send them a survey as well. If you do think of anything later, feel free to send it through and I can pass it on to Tim or contact your ING direct representative Thanks very much for joining us today and have a good afternoon.

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