Banks Have No Idea How to Handle Millennials

PORTLAND, Ore. (TheStreet) -- If you saw the entire banking system collapse and spent the majority of your early career riding out the consequences in a low-wage job while remaining financial institutions helped themselves to bailouts, would you really want to help out the financial services sector?

No. In fact, there's a strong chance that the words "financial services sector" alone might set you into a rage spiral from which you'd need a break from the barista station and a few hours of social media time to recover.

Corporate Insight, a market research firm for the financial services industry, recently released a study titled The Millennial Shift: Financial Services and the Digital Generation with findings that shouldn't surprise even the financial services industry anymore. As it turns out, millennials have had just a few problems with college debt and employment in the past few years and don't necessarily see the financial services industry as their ally.

"Millennials put a high value on transparency and are wary of financial institutions, particularly when it comes to ambiguous fees or pricing," says James McGovern, Corporate Insight's vice president of consulting services. "They also have very high expectations in terms of online and mobile services that many firms do not meet today."

No, financial services probably aren't high on the list for this particular generation. About 36% of American workers older than 25 with a high school education or less started losing jobs in 2007 and haven't stopped. About 767,000 fewer of them reported having a job in 2012 than in 2010, and 2 million workers in that demographic left the job market altogether during that span.

A college education hasn't always helped, either. Even college graduates have seen their average pay decrease by $3,200 since 2000. A full 284,000 of them earned minimum wage last year, while the average U.S. student loan debt topped $27,000 -- a jump of 58% in just seven years. Though job numbers have recovered a bit, roughly 65% of those regained jobs have been of the low-wage variety. Unfortunately, the National Employment Law Project says nearly 60% of all jobs lost during the recession paid middle-income wages or better.

The Center For College Affordability and Productivity reported that nearly half of the college graduates from the class of 2010 are working in jobs that don't require a bachelor's degree. Of those, 38% have taken gigs that don't even require a high school education. A Harris survey for the University of Phoenix found that 80% of workers in their 20s say they want to change careers, compared with 64% of 30-somethings and 54% in their 40s. That same survey indicates that the jobs millennials work are seen as launching points for jobs in the arts and sciences, technology and health care. As a result, a Gallup survey found that that 53% of millennials aren't engaged in their jobs at all and approach their work with the kind of detachment one would expect at a temporary position -- compared with 52% of all Americans who do the same.

They don't want to make risky investments, they expect those they invest with to be socially responsible and they really can't stand institutions that they feel are out to cheat them.

Corporate Insight looked at four areas of the financial services industry -- banking/credit cards, brokerage/investing, insurance and retirement plan services -- and came up with recommendations for companies looking to make peace with millennials and actually help them out with their finances. Here are the highlights:

1. Get mobile or get out: You know all those features on your bank's website that aren't available on its app? Yeah, they're not helping anybody.

A higher percentage of millennials own smartphones than any other generation. For 18% of millennials, they're the only point of access to the Internet, compared with 5% of Generation X and 3% of baby boomers. Oh, and those laptops and desktops that are about 20% of connected devices now? They're going to be just 13% by 2017, with tablets alone taking 16.5% of the market and smartphones absorbing 70%.

So why can't banks hook up the 69% of millennials already accessing financial services through smartphones? Because they just can't understand why millennials want no part of their long-range plans. They've been through enough market swings to know they can't plan beyond the immediate future without any certainty. If banks can help them save for a vacation, a house or a family, it's a start, but banks would rather shove them into retirement plans they have absolutely no use for.

It also turns out that they're looking for investment advice, because standardized testing in schools doesn't account for useful things like that. Instead of giving them instructional videos and interactive tools to help them achieve investment goals, though, institutions keep giving them calculators and pictures of old farts on a beach. Nobody cares about grandma's dream retirement in Boca when you can't figure out how you're going to afford your next day off.

2. No risk, no hidden fees: That lack of stable employment and income means millennials have limited investable assets and low tolerance for market risk. They want to figure out sound investment and aren't unwilling to listen to experts, but traditional financial advisers and the fees that accompany them are basically everything millennials are trying to avoid.

That's bad news for high-priced brokerage firms but great news for low-cost startups offering guidance at a discount and giving young investors interactive, hands-on means of managing their finances. A bank's online interface from 2008 isn't going to cut it, nor is just about anything a firm send out as a paper document.

Oh, and fees count as a risk as well. Making a profit is fine, but hiding or obscuring fees for items from simple transactions such as wire transfers to long-term effects of fees on savings and investments isn't going to cut it. Do everybody a favor and drop the hidden page with hundreds of words of legalese in the smallest point size available and just spell out your fees in an easy-to-find page in plain type and plain language. Otherwise, your institution just looks like a country club for liars and bookies.

But whatever you do, don't dumb it down for "the kids." Young though they may be, these are grown adults who are providing your firm some business and have no problem taking that business to a startup or credit union if you start slapping things such as #YOLO on your site.

3. Tell it like it is: Selling life insurance and wondering why millennials aren't buying any? Here's a hint: They and the generations that came before them think life insurance is overly costly.

If financial groups think otherwise, they need to just spell out why. "It's not as expensive as you think" isn't enough. Provide the numbers. Chart the data. Make it easy to read and access. Make it something they can not only calculate, but get a firm number on without talking to anyone. Car insurers figured this out a long time ago, but numbskull firms still act like door-to-door insurance salesmen who'll lay out all of the benefits of life insurance while saving the cost for last -- like they're springing a trap. Stop it.

This goes for products such as renters insurance too. Want to convince someone it's worth their while? Give them a means of figuring out what the stuff in their one-bedroom or two-bedroom apartment is worth and why having insurance cover it beats buying it new. Again, moving companies figured out this formula a long time ago and turned it into a completely online process. Finance-focused companies need to do the same.

4. Make retirement a more pressing matter: If you have to push young investors toward retirement plans, you're going to have to come up with something better than the fire-and-forget plans millennials not only won't see on a regular basis, but won't see as much of a necessity when they're struggling just to maintain steady employment.

Firms have to illustrate how putting aside some money now will lead to more down they road. They need to embrace online planning tools, mobile access and features such as auto escalation that will reassure young clients they can meet their goals. They need to make it a present concern, which can be tough when your clients are already overly concerned about the present.

-- Written by Jason Notte in Portland, Ore.

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Jason Notte is a reporter for TheStreet. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, the Boston Herald, the Boston Phoenix, the Metro newspaper and the Colorado Springs Independent. He previously served as the political and global affairs editor for Metro U.S., layout editor for Boston Now, assistant news editor for the Herald News of West Paterson, N.J., editor of Go Out! Magazine in Hoboken, N.J., and copy editor and lifestyle editor at the Jersey Journal in Jersey City, N.J.

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