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From Punch Line to Prospect: Millennials, Robos, and Delivery of
Investment Advice to the Next Generation
From Punch Line to Prospect: Millennials, Robos, and Delivery of Investment Advice to the Next Generation
■ Moderator: Dr. Kenneth Kehrer, Principal, Kehrer Bielan Research & Consulting
■ Panelists:
• Timothy Kehrer, Senior Research Analyst, Kehrer Bielan Research & Consulting
• Bruce Hagemann, CEO & Executive Director, BBVA Securities, Inc.
• Tom Mudlaff, Senior Vice President, Capital One Investing
Adding to the Discussion with Kehrer Bielan’s Consumer Research on Millennials
“Inspired” by a breakout session at last year’s conference, forthcoming whitepaper on the opportunity for financial institutions to serve Millennials’ investment advice needs.
Detailed demographic, financial, and psychographic profile to serve as a blueprint for marketing to younger investors.
Data from the most recent MacroMonitor survey, conducted every other year since 1978 by the Consumer Financial Decisions unit of Strategic Business Insights.
2014-2015 survey covers 4,405 US households, including 1,121 millennial households.
Millennials, Robos, and Delivery of Investment Advice to the Next Generation 3
Millennials – Why Even Care?
• Individuals born between 1981 and 1997. The oldest members of the Millennial Generation are turning 35 this year.
One quarter of US households are headed by a Millennial.
Common assumptions (stereotypes?) lead some to believe Millennials are not a ripe market for bank and credit union investment services.
They are 14% less likely to have a great deal of trust in traditional financial institutions.
15.1%
13.0%
Household has great deal of trust in financialinstitutions (averaged across 8 institution types)
Percent of US Households
Percent of Millennial Households
Millennials, Robos, and Delivery of Investment Advice to the Next Generation 4
Millennials Have Not Yet Accumulated Significant Investable Assets
Millennials, Robos, and Delivery of Investment Advice to the Next Generation
46.1%
15.0%
4.6%
13.1% 15.3%
5.0% 0.6% 0.3%
64.7%
18.9%
5.1% 7.2% 3.7%
0.5% 0.0% 0.0%
<$25k $25k < $75k $75k < $100k $100k <$250k
$250k <$1mm
$1mm <$3mm
$3mm <$5mm
$5mm+
Financial Assets of Millennial Households Compared to All US Households
Percent of US Households Percent of Millennial Households
Nearly 90% of Millennial households have less than $100,000 in financial assets.
5
Millennials Do Not Want to Pay for Advice
Millennials, Robos, and Delivery of Investment Advice to the Next Generation
38.4% 40.9%
33.5%
63.6%
I would be willing to pay for professional financialadvice
Household prefers to do most or all of the researchand decision making itself when it comes to
investing
Households That Agree or Mostly Agree
Percent of US Households Percent of Millennial Households
And they don’t think they need investment advice.
6
Or, Are Millennials an Untapped Opportunity for Banks and Credit Unions?
Millennials, Robos, and Delivery of Investment Advice to the Next Generation
3.7%
7.3%
4.2%
9.0%
10.5%
15.0%
32.9%
37.9%
3.0%
4.6%
4.7%
8.0%
9.5%
12.5%
26.2%
35.7%
Discount stockbrokerage
Full-service stockbrokerage
Consumer finance company
Mutual fund company
Financial planning company
Insurance company
Bank
Credit union
Institutions Viewed with a Great Deal of Trust
Percent of MillennialHouseholds
Percent of USHouseholds
They may have lower levels of trust in financial institutions overall, but they prefer banks and credit unions over other institutions by a wide margin.
7
Millennials Believe They Will Receive Better Advice from a Bank or Credit Union
Millennials, Robos, and Delivery of Investment Advice to the Next Generation
38.4%
63.7%
46.9%
61.3%
Banks, S&Ls and credit unions are the best sourceof advice regarding my savings and investments
Over the long run, say 10 or 20 years, stocks will bea very good investment
Households That Agree or Mostly Agree
Percent of US Households Percent of Millennial Households
And they are just as likely to trust the stock market as compared to other generations.
8
Millennials Are Already Focused on Retirement and Engaged in Investing
• Millennials choose “providing for retirement” as the #1 goal for their savings and investments.
• Want to learn more about how to prepare for retirement and choose investments.
• More than one third own a brokerage product purchased from a bank or credit union.
• Investment services penetration of Millennials lags behind other generations. Or does it?
Millennials, Robos, and Delivery of Investment Advice to the Next Generation
20.3%
18.4%
16.5%
12.8%
12.9%
36.1%
34.6%
38.1%
40.8%
34.0%
Greatest / Silent
Older Boomers
Younger Boomers
Gen X
Gen Y
Percent of Households That Use Brokerage Products or Services
by Generational Cohort
From Any Bank or CU
From Primary Bank or CU
9
Investment Services Penetration of Millennials Is Up 64% Over 10 Years Ago
Millennials, Robos, and Delivery of Investment Advice to the Next Generation
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
2004 2006 2008 2010 2012 2014
Household Owns Brokerage Product Purchased at Bank or CU
Millennials Gen X
Penetration of Millennials and Gen X’ers are increasing at the same rate.
10
Millennials Are Early Adopters of Bank and Credit Union Investment Services
Millennials, Robos, and Delivery of Investment Advice to the Next Generation 11
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
24 26 28 30 32 34
Age in Years of the Oldest Members of the Generation
Household Owns Brokerage Product Purchased at Bank or CU
Millennials Gen X
Today’s Millennials are more likely to invest where they bank than Gen X’ers were when they were the same age.
Millennials Want One-Stop-Shopping to Meet Their Financial Needs
Millennials, Robos, and Delivery of Investment Advice to the Next Generation
69.9%
53.7%
72.8%
51.9%
I would like to go to just one person who could helpme with my savings, investments, and credit needs
I am more likely to trust the advice of a financialprofessional who is paid a fee than one who is paid
a commission
Households That Agree or Mostly Agree
Percent of US Households Percent of Millennial Households
They prefer a fee-based model to a model based on commissions for transactions.
Millennials Are More Likely to Use an App, Less Likely to Connect in Person
Millennials, Robos, and Delivery of Investment Advice to the Next Generation
24.4%
29.2%
55.2%
28.7%
62.2%
23.3%
23.7%
44.7%
47.5%
68.0%
Talk with a representative(non-teller) inside a branch
Make a phone call andspeak with a representative
Talk with a teller inside afinancial institution
Use an app to access yourfinancial institution
Use the internet to connectto a financial institution
Financial Transactions Household Makes at Least Once in a Typical Month
Millennial Households
US Households
They are 14% more likely to say they are comfortable doing financial business online as compared to other generations.
From Punch Line to Prospect: Millennials, Robos, and Delivery of Investment Advice to the Next Generation
Bruce Hagemann
CEO & Executive Director
BBVA Securities, Inc.
Millennials, Robos, and Delivery of Investment Advice to the Next Generation 14
Technology is changing the way people invest and save
for retirement!
1. Easier access to information allows for better
decisions
2. Makes new transactions possible or easier which
saves time and effort
3. Reduce costs and lower fees
Technology is also changing the level of automation for
investment transactions from highly engaged self-
directed investors to passive investors with limited
investment acumen!
We are looking for a simple and convenient, highly
automated technology driven solution that can
provide investment advice for tech savvy passive
younger investors
Inexpensive Advice for Index-Fund Investments These companies offer help picking and rebalancing index and exchange-traded funds or similar investments, and are bringing significant pressure on management fees by lowering customer entry points and significant fee discounts.
“Robo” – Advisor Solution
Joint venture between digital bank and brokerage to provide a highly automated technology driven solution that can provide investment advice for tech savvy
passive investors that currently do not invest with any affiliates in the US.
Main Target Audience Clients of the bank between the age of 20 and 50 and meet ALL three of the following criteria:
1. Clients of the bank that do not have any investment accounts with us
2. Clients of the bank that are digitally engaged (they have sign on to online banking or mobile banking apps within the last 90 days - this is the standard definition Client Intelligence uses for all their reports)
3. Clients of the bank that have deposit assets (not investments) with us that are less that $500k and show investment asset potential greater than $50k but less than $1 million.
Client Enrollment & Awareness
Free Service Premium Service
Online Banking
Mobile Ads
Online Banking
Mobile Ads
Clients can personally manage their portfolio changes based on the recommended action plan from robo • holistic portfolio
analysis • Referrals to Financial
Advisors
• Tax-efficient portfolio transition
• Automated, smart rebalancing
• Automated Tax-Loss Harvesting
• Tax-aware portfolio construction + trading
• Smart cash contributions • Referrals to Financial
Advisors • 401(k) Advice
Robo Robo
Entities Structure for Free Service
Solicitor Advisor Legal Capacity
Key characteristics of the relationship between the bank and FutureAdvisor Bank will be a Solicitor to robo Bank will be able to determine what is marketed to these clients that are
referred and how these clients receive that information Robo will refer clients to bank’s RIA/broker-dealer that may need more
extensive/sophisticated investment solutions based on the data collected as part of the initial service
Bank
Robo
Entities Structure for Premium Service
Solicitor Advisor Introducing
Broker Dealer
Custodian/Clearing Broker Dealer
Legal Capacity
Key characteristic of the relationship bank, robo and IBD when the Premium Service is selected:
BANK
Robo
FutureAdvisor compared to other solutions: -Getting started does not require assets to be cashed and transferred -Main target clients are Mass Affluent -Can refer customers back to Bank who are looking for hand-on advice -Gray label solution (powered by RoboAdvisor) -Affordable integration costs -Quick implementation
From Punch Line to Prospect: Millennials, Robos, and Delivery of Investment Advice to the Next Generation
Tom Mudlaff
Senior Vice President
Capital One Investing
Millennials, Robos, and Delivery of Investment Advice to the Next Generation 25
From Punch Line to Prospect: Millennials, Robos, and Delivery of Investment Advice to the Next Generation
Questions?
Millennials, Robos, and Delivery of Investment Advice to the Next Generation 26
About Kehrer Bielan Research & Consulting
KBR&C provides the financial advice industry with insights based on a melding of research and experience in managing the delivery of investment, insurance, and wealth management services. The firm provides performance assessment and benchmarking, human resource management and development, due diligence, consumer insights, and interpretation of industry trends through its original research, unbiased consulting, and peer study groups.
www.KehrerBielan.com
27 Millennials, Robos, and Delivery of Investment Advice to the Next Generation
Kenneth Kehrer, PhD
919-533-6241
Tim Kehrer
703-566-8459
Christine Kehrer
Jon Gabriel
908-347-8197
Peter Bielan
770-331-1280
From Punch Line to Prospect: Millennials, Robos, and Delivery of
Investment Advice to the Next Generation
