While the Millennial generation, those born between 1982 and 2000, are still a young population, eventually they will grow up to become the next generation of mass-affluent investors, following the current Baby Boomers.

Millennials have been raised differently than any other generation due to the Internet and technology. Financial services firms must recognize the preferences of this group to capture the loyalty of these entry-level customers, according to the report "The Millennials, Financial Services and the Web" by Boston-based research firm Celent.

Celent interviewed 591 college students between the ages of 18 and 25 at 34 universities. Participants were compensated for their time with a $5 certificate to Amazon.com.

"One of the great myths of this generation is that they are marketing averse," said Rohit Bhargava, vice president of interactive marketing at Oglivy. However, that is "not the case," he said.

What is true is that Millennials are averse to irrelevant marketing, as they have grown up with the Internet and have the skills to find information on their own, he said.

Capturing Millennials' business and forging relationships with them at a young age is a prudent idea for investment firms. Millennials are aware of the importance of saving for a house, accumulating wealth for children's college education and retirement planning, said Ashley Evans, an analyst at Celent and co-author of the report.

Due to the proliferation of media coverage regarding debt, even the younger generations are thinking about the problem, Evans said.

The most effective way to reach Millennials and grab their attention is through word of mouth; 81% of respondents said they would possibly check out a financial services offering referred by a friend.

Also, Millennials trust their parents' recommendations on financial products and advice, Evans said. Because young consumers continue to rely on their parents for financial advice even after they leave home, this provides an opportunity for financial services firms to effectively mine their customer databases to cross sell products and services to the next generation, according to the Celent report.

When advisers are working with clients who have children, they should mention that they have comparable products that can be provided for them, Evans said.

The use of financial products among the young generation is increasing as well. Twenty percent of respondents indicated they currently use investment funds, life insurance and mutual fund products, an increase of 10% from a similar report conducted by Celent in 2003.

In the future, 36% of respondents indicated they would use a stock portfolio to achieve their goals, and 33% indicated they would definitely use a mutual fund.

Another marketing avenue that may be beneficial for firms is worksite marketing, as 71% of respondents stated they would be willing to check into a financial services provider recommended by an employer. The workplace is an excellent venue to market to Millennials, and firms are increasingly starting to recognize this, Evans said.

Regarding advertising avenues, online advertising is nearly as effective as print ads, and 41% of respondents stated they would "probably" or "might" look at a provider after seeing their online ad. This is a significant increase over the 2003 report, where only 29% of respondents agreed.

Firms need to be cognizant of this and make certain that their firm name comes up on the top 10 search when key words are entered, Evans said.

A growing number of online financial management resources is targeting this age group, and it seems that the Millennials are paying attention, Celent states.

As Millennials are the only generation to have access to the Internet their whole life, it is not surprising that the use of technology is important to them. Thirty-six percent prefer to interact with financial services providers through the web, compared to 29% in the 2003 report.

As far as receiving information, 71% of respondents indicated they preferred to view information online, versus 65% in 2003, Celent found. Only 2% preferred to call an 800 number for information. At a minimum firms need to be competitive with their peers, and offer informative and easy to use websites, Evans said.

E-mail and mobile phones were cited as some of the most frequently used communication tools. Celent predicts that the mobile phone area will be a key remote channel for financial services marketers in the next few years.

Mobile marketing can be tricky, Bhargava said. If a client doesn't want a text message, they get upset if they receive an irrelevant marketing message that they had to pay for, he explained. A client would have to give a firm permission to send them text messages, he said.

Regarding retirement, the majority of respondents, 81%, believe that their savings would constitute the main source of their retirement income. They also realize that Social Security and pension funds are dwindling, and only 22% and 14%, respectively, believe that it will be a main contributor for retirement.

(c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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