Born between 1980 and 2000, Millennials or Gen Y’s seem to be the staple diet of any automated investment advisory service, or otherwise known as Robo-Advisors. Extreme growth has inundated this buzzing industry over the past 4 years, with some of the largest financial institutions arriving late to the party and still wondering if there is a seat left on this high-speed train.
Technology certainly has outdone itself this time. The sleeping giant of the last century, the financial industry, has been poked and prodded and has woken in a daze wondering who’s sleeping on the other side of the bed: enter the Robo-Advisor. In the past young people have been largely overlooked by financial advisors because it has not been economical to service them. Technology has changed this debate and found a way to service an entire younger generation and middle class, and as evidence shows Millennials are leading the race.
Born into the technological age Millennials have grown to trust technology, and their relationship with technology has made digital asset management more appealing. Following the financial crisis in 2008, led by a greedy elitist industry, it only makes sense for skeptic Millennials to turn to products that provide transparency and equal services for all. WealthFront, which currently has over $2.5 billion assets under management, reports that 90% of its customers are under 50 and 60% are under 35, whilst RobinHood has a customer base averaging a very youthful 26.5 years of age. And this youth should align with our logic, as Millennials are still accumulating wealth and are not necessarily in the global 1% that has access to superior advice, leading them to a mobile solution that answers to their demands.
The proverbial IoM (Internet of Me) fueled by social media, demand side economies and personalized mobile technology has encouraged Millennials to adopt Robo-Advisors without much of a thought. And it is safe to say the technology and demand has converged perfectly to propel us into a new financial age, spear headed by the Gen Y’s. With Millennials starting to accumulate funds, online advisors are only going to grow, but first trust must be earned and more importantly, maintained. It is clear what happens when you let innovation run wild in a bull market, but the game will only begin once the Bear market comes out of hibernation (Rule of thumb, every 12 years). The next concern will be whether Robo-Advisors are able to handle the intricate financial planning that Millennials will require as families and futures are taken into consideration.
South Africa specific problems and policies have left us waiting for a solution, but it is certainly not our seemingly attractive young population driving this innovation away. Perhaps it the absence of a middle class, stunted economic growth or lack VC funding?
Technology is an enabler, a differentiator—and now, a requirement for building and maintaining relationships with the new generation of tech-empowered and savvy clients. Perhaps it is time for South Africa to take note of the important demographic trend in this disruptive industry to create a new future, a better future.