Financial firms need technology to connect with younger clients

Let's say you are a bank or a financial advisory firm. For years, clients and prospects would come to your branch, get to know the staff and open up accounts in person. If you did a good job, referrals would trickle in and the business would grow.

That is, until the millennial generation came along.

To keep up and connect with younger clients it's clear that traditional financial services firms need to employ relevant technology solutions.

So does this world simply move past the bank branch? Are financial advisors doomed to be disconnected from the generation to follow? The simple answer is, "probably not."

Millennial with mobile phone
Domoyega | Getty Images

The deeper answer is collaboration. Cooperation, respect and understanding are needed on both sides of the technological divide. Traditional businesses should be curious about the value of new innovations and look for ways to plug them into existing processes.

A white-label robo-advisor or chat window on your website won't hurt. Similarly, millennials should recognize the deep value that financial advisors can offer them to solve real problems. Smart financial planning and investment management will take care of the anxieties suffered by my generation.

Here are the symptoms: Instead of talking with another person, they want to text. Instead of coming into the branch, they want to download an app. Instead of paying with cash, they swipe their phone. Not to mention all the time spent on Snapchat, Twitter, Tumblr, Facebook, Instagram and the rest of the social networking alphabet soup.

What can a brick-and-mortar financial advisor do? And why is the next generation so buried in their phones?

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Here are some interesting statistics about the way people live today. First, we are glued to our smartphones, computers and TVs. Average screen time is more than 10 hours per day in 2016, an hour longer than last year, according to Nielsen. But for young people, TV has become much less relevant. Instead, 30 percent of those between the ages of 18 and 24 use Snapchat daily, and 35 percent of millennials use YouTube daily, based on a survey from marketing firm Fluent.

Texting has had massive adoption with young people. The world's two massive texting technologies, WhatsApp, with more than 400 million users, and Facebook Messenger, with 145 million users, are both owned by Facebook (Note: Audience numbers sourced from comScore). Young Americans simply prefer texting to calling, changing the fabric of how we interact with each other.

When millennials are lost in their phone, they are communicating with each other, not just playing with technology. Though foreign to older generations, this constant exchange of transient pictures, streaming video and dozens of daily texts are the digital equivalent of having an in-person conversation.

A strange dynamic emerges. Older generations think that younger generations are not having meaningful human interactions. They avoid phone calls. They don't talk to their financial advisors.

But on the other hand, this is also the failure of traditional financial firms. They do not talk in the language of how millennials listen. Many do not know how to be authentic on Twitter, how to turn on Snapchat, why they should build a Facebook page or stream live video. If these two modes of conversations are two languages, then we are talking past each other.

Financial advisors cannot sit still. Why? Because there is a $30 trillion intergenerational wealth transfer in progress.

Young people with small investment accounts today are the future of wealth management tomorrow. But they are unprepared and anxious. According to a Northwestern Mutual 2016 survey, 34 percent of millennials do not think that Social Security will be available to them when they retire. Many are fretting about daily expenses, student loan debt and mortgage or rent expenses. The American dream looks a lot further away these days.

"The deeper answer is collaboration. Cooperation, respect and understanding are needed on both sides of the technological divide."

In fact, the shape of the American dream itself looks a lot different. Instead of looking forward to stable employment from a generous employer, millennials are redefining the future of work. They are increasingly employed in temporary, contract-based arrangements.

On the consumption side, they choose the "subscription economy" rather than the ownership economy. Rather than buy a house, they travel and rent out Airbnbs.

Instead of having a car, many use Uber as the transportation of choice. Life is becoming much more on demand and much less tied to physical assets. Though convenient, this may not be a great way to build lasting wealth.

As a result of a permanent state of uncertainty, young people have tried to solve their problems with technology. After billions of venture capital investment in the space, a whole category of robo-advisors, firms such as Betterment and Personal Capital, offer apps that aim to help with investing.

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Savings apps such as Acorns boast nearly a million users, according to TechCrunch, and help people invest their change in an online piggy bank. Countless such start-ups are born where millennials hang out: on the social web, in the mobile chat screen and, shortly, in virtual reality.

To keep up and connect with so many clients, tech firms are using "chatbots." These are artificially intelligent communication programs, similar to Apple's Siri but confined to a chat window. The large high-tech firms are developing core platforms that help programmers build chatbots and plug them into new apps. There are now more chatbots built on Facebook's platform than there are Facebook employees. Expect to see a lot more texting, business to human.

— By Lex Sokolin, partner and global director of fintech strategy at Autonomous Research