The members of Generation Y, also known as "millennials," have vastly different backgrounds and expectations than the generations before them. Today's 20-somethings can't remember a time without smartphones or the ability to access the information most important to them whenever they need it. It would be easy for some mutual fund managers to assume that millennials lack the same mindset or appetite for risk when it comes to investing and saving than previous generations, and view attracting them to mutual funds as a Herculean task. However, both of these assumptions are false. If managers embrace the technology and engagement with companies they trust that millennials have grown up with, they can successfully grow their assets by appealing to this relatively untapped investor base.
A Wells Fargo Retirement study released in May 2013 found that 61% of millennials see themselves as "savers," while only 46% said their parents fit into that category. Of the millennial respondents who are saving for retirement, 32% said they were "not sure" how much they have invested in stocks or mutual funds, while 18% said 100% of their savings are invested in stocks or mutual funds. The Wells Fargo Retirement survey shows that many millennials are indeed actively engaged in saving and investing, even if the majority currently do not invest in mutual funds. These figures will likely change in the coming years as many millennials reach an investment crossroads when they inherit assets from their parents.
Several fund firms are already laying the groundwork to engage this demographic through creative communications. Earlier this year, a filmmaking competition at New York University's Tisch School of the Arts was organized to encourage students to produce movies that made mutual funds appeal to 20-somethings.
The organizers knew they would face challenges. When Daniel Enskat, a partner in production company Warren Enskat Group and asset management advisory firm Enskat and Associates, and his production partner, Robert Warren, who teaches at the Tisch School of the Arts, presented the competition to students, they found that nearly no students they spoke with invested in mutual funds. Despite the initial ignorance, 25 ideas were submitted, and the two winning entries were turned into several-minute-long films produced with funding from the Warren Enskat Group.
One of the winning entries was Stocktopussy, a homage to James Bond about a fund manager, Agent 007%, who squares off against the Evil Task Force (ETF), which is after the secrets of his actively managed portfolio. The other winner was Frenemies, an animated film about a young woman who realizes that if she invests in a mutual fund instead of buying too many clothes and shoes, her dream of opening her own business could come true. The films were shown in Monaco at the annual FundForum International conference in June, and Enskat publicly stated that he had meetings lined up with executives at fund companies regarding future projects to further engage millennials with mutual funds.
Many fund managers are already producing videos to educate millennials about their mutual funds and create brand awareness. These videos provide invaluable and engaging content, especially if they are posted on fund managers' websites, along with YouTube and other social media channels.
Given the nature of this generation's need for continuous connectivity and information consumption, mutual fund managers cannot overlook or underestimate the impact of even the most basic online strategy to attract millennials. In 2011, financial advisor Alexander Efros of Athelon Wealth Management posted a six-minute video entitled "The Top 7 Things Your Wall Street Broker Doesn't Want You to Know" to YouTube. The video has been viewed more than 8,600 times, and as of November 2011, it garnered Efros two new clients, one of them with investable assets of $1 million. Efros also posted to YouTube an educational presentation about mutual funds entitled "What is a Mutual Fund? — Mutual Funds Explained," which has been viewed more than 2,950 times.
Interactions between mutual fund managers and investors in social media are part of the new normal, and facilitating these conversations can have a positive impact on client retention and growth. According to a survey of Twitter users completed by Twitter Q and A search service inboxQ last year, 64% of respondents were more likely to make a purchase from a business that answered their questions on Twitter, thus demonstrating the power of even a single engagement. Fund companies should leverage these channels by first conducting extensive research into the strategies and messages that will most appeal to this generation and then creating content, disseminated through social media, that directly speaks to the needs of millennials.
Millennial investors represent both the greatest challenge and opportunity for mutual fund managers. These are investors who have experienced several recent financial crises in recent years, including the dot-com bust, housing market crash and downgrading of the U.S. credit rating. However, these are also investors who are looking to save for retirement and seeking out alternatives to traditional savings accounts. By creatively educating and engaging with millennials, fund managers can demonstrate the value of their strategies, while building brand equity and trust with a key demographic group that has a growing pool of assets to invest.
Jennifer Connelly is chief executive officer of Jennifer Connelly Public Relations.