Tapping Into Tomorrow's Market

The youngsters of today are the market of tomorrow. Financial Advisers building sustainable businesses will recognise the importance of tapping into this market to future-proof their practices, as their Baby Boomer clients move into retirement. But who are these youngsters and how does a Financial Adviser approach them?

Capturing the business and loyalty of a young consumer makes excellent business sense in the financial services industry, not only because of the immense value for a life-long client, but also because a financial adviser will be able to build a solid relationship over decades, and will have innumerable opportunities to upsell and cross-sell to such a client through the various life stages.

Getting to know the market Generation X and Generation Y present a completely new type of consumer compared to the Baby Boomers, also known as the ‘silent generation’ for their unquestioning, trusting approach. Unlike their parents, however, Generation X and Y have access to far more information and are much less trusting. Generation X

• Born between 1965 and 1979.
• Financially independent and family-oriented.
• Educated, discerning and insists on shopping around.
• Cynical, sceptical and keenly aware of their consumer rights.
• Value qualities such as speed, convenience and simplicity.

Generation Y

• Born after 1980.
• Technologically savvy, having grown up with Internet and cellphones.
• Image conscious, socially influenced, financially dependent and career driven.
• Generally single and seldom have dependants, so little need for risk cover.
• Savings and retirement planning seems less urgent.
• Feel invincible, so insurance is not top-of-mind.

Spotting the opportunities

These characteristics of the younger generations reveal some specific opportunities, most notably for products covering risks that may adversely impact their future ability to produce an income, such as accidents or disability.

It is an accepted fact that the majority of disability events for younger clients are caused by accidents. In addition, the fact that many younger people are forced to become entrepreneurs, due to BEE initiatives and a flat job market, highlights the need for disability cover, as business owners do not have sick leave or medical aid benefits paid for by an employer.

“For these reasons, income protection cover is essential for youngsters,” comments Brad Toerien, CEO of FMI. “They may not have debt or dependants, but their biggest asset is their future income stream. The risk to their future income stream is greatest at the beginning of their careers, yet paradoxically, this is also the time when this risk is the cheapest to insure.”

How to approach the younger generation

A few of the opinion leaders, mavens, trend predictors within the HDI Youth Marketeers’ Junior Board of Directors – a hand-picked group of young people chosen for their cultural diversity and astute opinion leadership in various spheres of influence – offer a keen insight into how the younger generation think about insurance – straight from the horse’s mouth!

We asked these youngsters whether they prefer buying directly from insurers or working through a Financial Adviser. We also asked them how they do their research, what they are concerned about and what they expect from the companies they deal with. We also asked them how they want to be approached by marketers and what the deal-clinchers are for them.

“I prefer using Financial Advisers, purely because they’re able to compare different insurance companies. Costs are very important, I don’t want to spend too much on insurance, so if there’s less cost implications and they’re able to deliver then that’s great. Also, I want someone who has the knowledge and expertise on insurance. Insurance companies should look at ways of appealing to the youth market, like advertising via text messages or sending video messages. Insurance companies need to offer cell phone insurance, because I’m young, and things happen.” - Ehua Adande, 21

“It’s better to deal directly with an insurance company. It’s very simple contacting the insurance company directly as opposed to approaching a Financial Adviser. And the problem with a Financial Adviser is that they tend to charge additional service fees, and I don’t want such implications. Insurance companies need to speak to the youth, and be able to speak their language, in that way, they’ll be able to appeal to us. Making use of circumstances that relate to the youth, formulate adverts which includes young people in it. If they offer a wide range of packages, a lot of young people will opt for that. They just need to be able to live up to their words. And make sure there aren’t any hidden stories.” - Linda Mbuso, 24

“My first point of contact would be an insurance company, because it’s only safe to assume that they’d know more information about their own products. To appeal to the youth market, insurance companies need to tailor-make products to suit young people. They can also establish a game that teaches young people about insurance. In that way one will be more familiar with insurance. I’ve been told that insurance people tend to mess around with people’s heads, I don’t want that, so one needs to be sure.” – Nazir Khan, 21

“Making use of a Financial Adviser seems like a complicated process. I’d rather deal with the insurance companies because I know they are equipped with all the information. The Internet is proving to be more effective in terms of advertising. If insurance companies can create their facebook pages and twitter pages to suit young people, they can be more appealing, and that will work. They should also include affordable packages. Insurance that speaks to me as a young adult will be worthy of my attention. They need to make sure that their packages are more exciting, with youth appeal.” - Dane Botha, 22

“I’ve had experiences with Financial Advisers, and in my opinion they’re expensive. Also, the way in which they’re portrayed, I’m not really impressed with them. I’m not easily swayed by advertising. I make decisions based on experiences. Hippo.co.za is doing a good job, I love what they’re doing. They have a fresh approach, and their quotes are reasonable. I need to be able to feel that I’m getting a great service. Therefore, insurance companies need to be very transparent in their dealings. They need to show me that they’re not messing me around. I want proper insurance. And because I’m young, and I need to pay as little as possible.” - Steven Meyers, 21

Key insights

• Affordability is key!
• Youngsters want very quick, simple and streamlined solutions.
• Youngsters want very specific product solutions - tailor-made to fit their needs.
• Financial advisers are expected to find the best deal, harnessing their expertise and experience.
• Financial advisers need to address misperceptions around fees and commissions.
• Urban young adults are very suspicious of the small print. Much work remains to be done to build trust.
• Youngsters expect communication through the mediums – and in the language - they are familiar and comfortable with.

If you are looking for a product that will meet this new generation’s stated demands – products that meet their actual needs, are affordable, and are simple to understand and quick to consume, with no delays due to underwriting and immediate acceptance, among many other benefits, the ideal place to start is FMI’s Accident Only Benefit, designed to cover those below the age of 32 and included under FMI’s BPE product. In addition, FMI’s range of income protection products offers many opportunities to provide young entrepreneurs and business owners with the protection they need at this important time of their lives.

When approaching this market, financial advisers need to adopt a new role: that of mentor, guidance counsellor and life coach, adding real value to the lives of these young people through regular contact, using their preferred mediums, to provide practical information and value-added advice that will build trust. Once you have gained their trust, it becomes a simple matter of keeping up with their lifestyle changes, so you can recommend products and benefits relevant to their particular life stage.

“The younger generation are the future masters of industry,” says Toerien. “Look after them now by highlighting and meeting their specific needs, even if it means spending more time on them than what the immediate outcome justifies. As their businesses and wealth expand, your efforts will be rewarded.”