3 Ways Financial Institutions Are Getting Millennials Wrong

We want financial success. Here’s how credit unions can help us get there.

 
 

“How can we attract more millennials?”

This is the million-dollar question that every credit union executive is asking. In a competitive marketplace, it’s crucial to determine how to engage and build loyalty with my young generation — considering we now outnumbers the Baby Boomers. It’s a tough undertaking, particularly because my generation has been described as “[having] a different set of behaviors and experiences than [our] parents”. .

But attracting millennials is half the battle. As Todd Romer, founder of Young Money Media, notes, “It’s well documented that nearly 50% of millennials are willing to switch financial institutions if given a good reason.” The question becomes: Once onboard, how do credit unions get millennials to stay?

I recently participated in a millennial panel discussion led by Romer at the Kentucky Credit Union League Annual Conference, with the goal to address these concerns. The panel included eight millennials: four students who are in college and have little financial background, and four who have graduated college and work in the financial industry. In our discussion, we uncovered three key pain points millennials have with financial institutions, and ways to overcome them.

Financial Literacy Is Archaic

My generation thinks we have it all figured out.

A 2014 George Washington University study of 5,500 millennials and their economic and financial situations found that 70% of the respondents believed they had a high level of money savvy-ness. However, the researchers concluded that only about 8% of the individuals polled actually had high-level knowledge of personal finance. Clearly, we don’t have it all figured out, especially when it comes to finances. But how can credit unions combat the issue of poor financial literacy with millennials who, wrongly, believe they know everything? For starters, stop calling it “financial literacy.”

 

 

When I hear these words, I immediately have flashbacks to sitting in a classroom listening to a lecture. Instead, as one member of the panel pointed out, we should start referring to it as “financial success.” Who doesn’t want to be financially successful?

Another barrier between my generation and “financial success:” because we think we know it all, we are less likely to ask for help where we may need it. According to the above study, only 27% of millennials are seeking professional financial advice on savings and investments. One member of the panel, who has very little financial background, claimed that she has yet to open a credit card because she’s too scared of the consequences — that’s despite research showing how important credit is in building “a solid financial foundation for long-term success.” Another panel member with little financial background said that she doesn’t understand the interest on her student loans, but she’s too embarrassed to ask someone at her bank for help. I know that these individuals are not alone. But personal finance can be confusing, and the way help is presented is often not helpful. With so many outside distractions, why would we stop to read an email from our financial institution about financial literacy? We wouldn’t. However, we might read a quick pop-up on our online bill pay that outlined different and specific components of “financial success.” We need our financial success tips in an easy-to-digest format.

Focus On The Now

An audience member asked our panel, “What is your financial goal in the next five to 10 years?” Us panelists looked back and forth at one another, hoping we wouldn’t be chosen to answer. One of my “financially savvy” panelists, took one for the team and said, “I hope to be employed in the next five to 10 years.” The audience chuckled, but it’s true.

Millennials have had a difficult time finding jobs. We’re underemployed, and therefore have found it harder gain the necessary experience to climb the corporate ladder. In addition, many of us are crippled with student or other long-term debts, and we’re living paycheck to paycheck just to make ends meet. It is difficult to focus on where I want to be financially in five to 10 years when I’m trying to focus on paying my rent and contributing to my retirement fund today.

While we know the importance of saving, contributing to shorter-term funds for things like emergencies is often not a priority.

However, one panelist offered a creative spin on the typical “emergency fund” – if we start to think of it as an “opportunity fund,” we might be more likely to contribute. This opportunity fund could represent savings for a new house, a new car, or a vacation. But when those invested in our “financial success” put an optimistic spin on it, it makes saving a little more desirable (and it’s still there just in case an emergency does happen).

What’s In It For Me?

Another audience member asked, “Why is it so hard engaging the attention of millennials?” That’s an easy one.

So easy that all eight of the panelists came to the same answer: because we think about what’s in it for us. Financial institutions, for the most part, don’t. Rather, they market products and services by leading with the features — like rates and fees and terms. While this information is important in making a final decision, I don’t need a laundry list of all the features immediately upfront. It’s confusing as it is meaningless. Is a 3.875% rate on a 30-year fixed mortgage good? Is it good for me?

Many financial institutions are worried about creating the newest and best products and services to attract millennials, but maybe they should consider new ways of presenting current offerings — specifically as they relate to our various life stages. If you tell me what’s in it for me, I’ll be much more likely to listen to your pitch. Lead with the benefit, follow up with the numbers.

 

Nov. 2, 2017


Comments

 
 
 
  • Thank you for the succinct recap of the discussion panel and the outcomes. Some good reminders here for all of us and while specifically geared to one segment, the WIIFM concept really is applicable to all consumers. As the saying goes, a member wants the car, not the car loan.
    Bill