There are many reasons why 18-34 year-olds belonging to the avocado-on-toast loving generation are not seeking professional help with money management. This includes a lack of understanding about their savings and workplace pensions – and what these may add up to as a retirement income – along with the fact the world of pensions seems awash with jargon.
Add to this, scepticism about what value financial advisers actually offer, fears about the eye-watering fees charged, and worries about dodgy advice and mis-selling – and the advice sector has a major problem on its hands.
Right now, the sector is already under pressure to come up with engaging and compelling customer-focused solutions that help people understand their savings and pensions – and make a plan – due to the onset of ‘open-data,’ via initiatives such as the pensions dashboard and open banking. These are designed to give people a truly holistic overview of their finances – and the aim is to get more than 10 million savers engaging and taking action with their pensions.
At the same time, since the number of high-street advisers plummeted after the ban on commission was introduced in 2013, firms have also been encouraged to fill the‘advice gap’– in a bid to avert a situation where millions make costly mistakes with their money.
But if the advice sector is to engage millennials, it needs to go about this in the right way. And this is where robo /automated advice may well come in – as it has the ability to break down barriers to advice by lowering the cost and making it a whole lot more accessible.
While most millennials have more contact with their peers than potentially any generation before, most of that contact is unlikely to happen face-to-face. Young people spend a lot of their time communicating ‘virtually’ with one another in‘chats’ consisting of just 100 characters or so on the likes of Twitter and WhatsApp.
And this lack of human contact isn’t limited just to contact with peers. In fact, this generation loves doing almost everything online – and is likely to be very open to the idea of managing their money that way too – and especially if there’s a simple, convenient, low-cost option available to help them to do so.
With this in mind, the use of new technology, such as AI, to power online financial advice can offer a real solution for the millennial generation – helping to‘plug’ the advice gap for those who often have relatively simple financial needs.
By making robo/automated-advice part of their offering, advice firms can not only support many more customers as a result of the risk management and efficiencies automation brings, they may also find they broaden their appeal to the younger generation.
Rather than having to meet a financial adviser in person and fill out a pile of paper forms about their aims and appetite for risk, time-pressed 18-34 year olds may like the sound of a service where they can set up their pension with just a few taps on their phone or laptop.
Robo-advice may sound particularly appealing to younger people if firms can deliver an accessible and transparent digital service with an exciting and slick customer experience – and plenty of flexibility.
Millennials will, for example, be quick to see the appeal of a model where a computer does much of the hard work for them – and where financial jargon is replaced by plain English – all at a much lower cost than going through more traditional routes to advice.
So what does all this mean for retirement planning?
Robo/automated advisers who are able to offer customers an easier and quicker‘advice’ experience could find themselves perfectly placed to help young people start thinking about retirement at an early age – and to engage with their pension pots. In addition, such services may be just what is needed to guide these individuals through the process of choosing a pension suitable for their attitude to risk, and the process of making better provision for their future.
As smart software technology offers millennials a way to engage with their finances in as quick and as painless a way possible, they may start to see the value of taking control, and planning and managing their money, without having to spend their precious time – and cash – on face-to-face meetings with a financial adviser.
This, in turn, may lead to them seeing the importance of placing pensions at the heart of any long-term savings strategy. Seeing the power of a pension alongside other savings and investments can help people truly understand their value –and therefore improve engagement.
That said, there may be still times when these digitally-savvy millennials decide they need some level of human interaction in the advice process. For this reason, it’s important they have the option to access a hybrid service which offers not only automated advice, but also advice from a real person – either over the phone or face-to-face.
That way,they can speak to a knowledgeable and experienced adviser when the need for a bit of human touch arises – and get the reassurance they require that they are making the right choices for the future.