Last week, Morningstar ran our annual investment conference, on subjects ranging from Brexit and risk management to the cost of funds and the future of advice. Read on for our coverage of the Morningstar Investment Conference UK in our special report: What the Experts Say.
Millennials, young people aged 18 to 25, face a unique set of financial challenges. Having paid three times as much for their university education than those aged just a few years older than them, they then enter a workplace with fewer jobs post-credit crisis and a housing market priced out of their league.
Freddie Ewer, co-founder of financial education charity RedSTART said that as well as lumping this generation with a larger debt to pay off - at a greater rate of interest - the hiking of university fees was indicative of a trend to move the responsibility of provision from the state to the individual.
Speaking on a panel at the Morningstar Investment Conference in London today, he said: "This ties in with the move from defined benefit schemes to defined contribution pension schemes, and the introduction of auto-enrolment. The individual is in charge their future."
The problems they encounter aged 22 could have a life-long impact on their financial health, even hindering their chances of a comfortable retirement. Also on the panel, James Rainbow at Schroders said that unlike the lucky baby-boomers, Millennials would not benefit from the intergenerational transfer of wealth thanks to longer life expectancy of their parents and grand-parents.
"I call this the Queen and Prince Charles conundrum," he said. "This generation will be elderly themselves before they benefit from inheritance - longevity risk is not just about funding a longer retirement."
Rainbow also said that while products such as the Lifetime ISA and the Help to Buy ISA provided welcome additional savings options for young people, they confused an already complex market.
"The beauty of ISAs was that they were simple and easy to understand. The government risks putting people off saving by launching these more complex products," he added.
What Can the Industry Do to Help Millennials
Panel member Charles McCready, director at TISA said that education was key - across the age groups.
"Millions of people are relying on their house to fund their retirement. But even those lucky enough to get on the housing ladder need to realise that the costs associating with downsizing and on-going living expenses mean the most someone can expect from their house is a £5,000 annual income in retirement from their property," he said. "Education is important to get across the facts."
Ewer suggested that the advice industry engaged with behavioural science to encourage people to save, as effective campaigns were "easy, attractive, social and timely".
"There is a lot of rubbish on social Facebook and Instagram," he said. "But it is a fantastic tool to reach this audience. There is potential to encourage engagement in users financial future."
McCready added that that there was a need for financial advice in the future - even if the Millennials did not know it yet: "People want face to face advice when they are making the big decisions - they want someone to tell them the answer."
Rainbow agreed saying that the advice industry had been innovative in its history, and he was confident it would rise to the challenge of digitalisation and meeting the unique needs of the Millennial generation.
