Are you ready for the selfie generation?
Patrice Rassou, head of Equities at Sanlam.
Millennials are tech–savvy. They prefer to rent rather than buy. Millennials are foodies. They want to derive meaning and develop their skills rather than work for a big pay cheque. They don’t trust traditional financial service companies. Millennials don’t want to get married or have kids – yet”. Or so the urban legends go. Millennials are these aliens you currently call your kids, customers, colleagues or clients who were born between 1980 and 2000. They are a growing portion of our population and yet very misunderstood. But are all these assertions above a sign that you are out of touch with a new reality? Globally, Millennials number some 2 billion and are the largest demographic group with over 85% living in emerging markets! South Africa is also setting the global trend with some 20% of our population made up of Millennials.
Economics of Millennials
With jobs scarce, the chance of landing a job is only improved with better education, but even those lucky enough to be employed have found the going tough. The current reality for Millennials is that, post the Global Financial Crisis (GFC), a mortgage or other forms of secured credit are hard to come by. Many would have had resort to unsecured loans with dreadful consequences. An analysis of a typical debt counselling book showed that half of these defaults belonged to Millennials! Having missed the great housing boom of 1999-2007 and with residential house prices static in real terms since, buying a home has therefore been onerous, given that one would need to put down a hefty deposit. This makes the preference for renting or even staying in the parental home one of necessity.
Mobile nation
Over the past twenty years, the internet has penetrated 40% of the global population with close to 3 billion users online. However, an even more radical trend over the past two decades has been that the penetration of mobile phones has spread to three-quarters of the global population with over 5 billion users. South Africa has close to 100 million sim cards! Already a US study shows that consumers spend more time daily on their mobile phones than on their desktops, tablets or other devices in aggregate.
Globally, Millennials are known as the technologically enabled generation, owning one or more smart phone or tablet. As a rule, Millennials are more likely to resort to technology to play games or for entertainment. Hence it is not uncommon for a millennial to ‘cut the cord’ and not own a TV but to watch videos online as an alternative. There is also a much higher rate of adoption of social media. One of my colleagues, a Millennial, commented to me that social networks, such as Facebook, have increased the value of experiential activities that can be shared with friends digitally. This is both a blessing and a curse as it puts pressure on Millennials to compete subliminally for eyeballs.
Sharing generation
Buying and owning stuff are also definitely out. Why buy when you can rent? And this doesn’t only apply to lodging but also to books, movies, music and even cars. Access to transport has improved with the arrival of Uber, where you can call a taxi within minutes and predetermine the cost of the trip. Shopping is made easier by a variety of online sites with even local retailers like Woolworths and Mr Price opting for omni-channel strategies. In other words, they offer seamless online and bricks-and-mortar channels as distribution channels. We have also witnessed new retailing entrants, such as Naspers-backed Takealot.com, which recently absorbed Kalahari.net. Travel has also become the ultimate experiential activity which has been disrupted, with many airlines allowing travel agents to be by-passed and Airbnb easily the biggest hotel group in the world now. More importantly, online offerings provide immediate user feedback, allowing a community of like-minded people to be consulted.
Cash generation
A recent survey by Merrill Lynch reveals some unsurprising traits when it comes to the Millennials’ relationship with money. While not adverse to financial advice, Millennials still have the scars of the GFC freshly etched in their memories. An already sceptical generation with easy access to information online would indeed find the caveat emptor that ‘past performance is no indication of future performance’ alienating. This may indeed explain the success of banks like Capitec in attracting a younger clientele with easy-to-understand products with a simple pricing structure (they have an iTunes app which rivals Absa’s in terms of number of downloads). In fact, many Millennials have preferred – to their detriment – to opt for riskless investments, i.e. cash, despite fully understanding the need to invest for the long term to achieve their financial goals. While it could be a question of economics or recent history, it is quite clear that good financial advice is not obsolete. It may just have to be packaged differently.
Mirror mirror
Change is the only constant. A Millennial can now access a PlayStation or an iPad with the same computing power as the Cray supercomputer of the 1980s, which cost $30 million! Before going ga-ga over the Millennial generation, let me also tell you the bad news. A recent US survey shows the prevalent characteristics of Millennials are narcissism and materialism. This may come as a shock for a generation that claims to want to change the world and want to derive meaning from the work place. That, in part, explains why it’s so difficult to keep Millennials satisfied and challenged. What else would you expect from the selfie generation?
