South African millennials (those born between 1982 and 2000) are good at saving money, with 69% of individuals having a savings account, but they are failing when it comes to investing for the long term, research by Old Mutual has shown.
According to the Old Mutual Millennial Survey, only 44% of millennials are investing in a pension or provident fund and only 25% are currently invested in a unit trust. Alarmingly, 47% of South African millennials surveyed did not know what a unit trust was.
This is concerning as saving, instead of investing, means that millennials will be less likely to build wealth and retire comfortably. Long-term financial security simply cannot be achieved by saving alone.
What is holding millennials back from investing and what can fund marketers do to attract more millennial clients? We decided to investigate.
Why aren’t millennials investing?
Research has shown that many millennials prefer not to be formally employed, rather following a more flexible lifestyle. While this is great for work-life balance, it also means that these individuals aren’t automatically opted-in to traditional retirement products, like older generations were through their employers.
Instead it’s up to millennials to find and manage their own investments, which often means they start investing later than they technically should. Therefore, the low millennial investment figures reflected might very well pick up in a few years, but unfortunately by then, these individuals will already be on the back foot.
Another reason millennials are likely not investing as much as they should is a lack of education – confirmed by the 47% who do not know what a unit trust is. This figure is surprising for a generation that frequently teach themselves how to do things, using YouTube videos and thoroughly research all purchases online.
This points to the fault to some extent lying with financial services institutions. As stated in the Sanlam Benchmark 2018 Empowering Insights Research Summary the retirement funding industry does not support the buying process of millennials.
The report makes the point that it is not about product complexity but rather about relatability. Many millennials are able to explain and engage on topics like blockchain and bitcoin, which are far more complex, but their knowledge of traditional investment products is limited.
This is because, while information is available, it’s not available in the format that is relatable to millennials. They want information that can empower them to make their own decisions, rather than simply telling them what to do, like performance comparisons and information about the company’s social responsibility.
Furthermore, millennials also tend to distrust financial institutions and the economy as a whole. This is not surprising as many of them started their careers in the economic slump of the Zuma presidency, Sanlam notes.
What does this mean for fund marketers?
All of this means fund marketers need to learn to speak the language of millennials to attract these investors and help young South Africans secure their financial futures.
Here are a few things marketers can do to achieve this:
- Educate without being condescending – The Sanlam Research Summary notes that while millennials aren’t very clued up about their investment options, they are highly confident in their own abilities and believe they can craft their own investment plan. This means that, to reach them, you need to provide educational content that will empower them to make better decisions, rather than simply telling them to employ a financial advisor.
- Present information in interesting snippets – Rather than presenting your fund information lengthy documents stuffed with technical terms why not try making a short video, or presenting the benefits of your product in an infographic? This type of content is much more relatable and appealing to young potential investors who are used to finding their information online and on social networks.
- Project trust – To win over millennials you must ensure that you have a brand they can trust. This means respecting their data and privacy and being open and honest about expected and actual fund performance.
- Be transparent about fees – Millennials want to know exactly how much they’re paying and why, so be transparent about your investment fees. In fact, this is surely something older generations will also appreciate.
- Show that you care – If you can show how your company gives back to the community, that will also help earn the trust of millennials. Research has shown that about 75% of millennials want to know that their investment is doing social good, do not want to invest in companies known to be doing social or environmental harm and will only invest in companies that are aligned with their personal values.
- Don’t throw your information at them – Millennials are used to sourcing the information they need and will go look for details about your products if they’re interested in signing up. So, make sure your information is easy to find, but don’t spam them with unnecessary details they don’t care about.
Marketing your fund to millennials can seem like a difficult task, but it is certainly worth doing. These are the investors of the future and the country’s collective wealth depends on them making smart investment decisions, rather than simply saving their money in bank accounts.