Big Banks, Dwindling Fortunes Among Millennials
What’s preventing big banks and investing firms from pursuing strategies like these directly? Simple: Millennials are leaving traditional, large banks in droves.
“[Millennials] don't want to deal with the banks,” Amyx says. “Many millennials don’t even own credit cards. They communicate via social apps and increasingly want to complete commerce transactions via these apps. The banks simply have no way to create a relationship that can connect with millennials.”
For traditional banks, millennials haven’t been a major target in recent years for one simple fact: They’re broke. That’s slowly changing, of course, as millennials move up the income ladder through the sheer force of time and inheritance windfalls. Here, says Amyx, the financial services firms find themselves in a real predicament. “When someone passes away, those customers may take millions of dollars out the door—and the bank collects no fees,” he says. “Kids just don’t want to have a relationship with their father’s financial adviser.”
A Question of Trust
Is it far-fetched that a company best known for its disappearing message service could realistically make inroads into something as sober and serious as money management? Not necessarily. According to new research into millennial consumers' habits, 73 percent of those surveyed would be more excited about a financial offering from a trusted brand—PayPal, Square or even Google and Amazon—than from their bank. Though the research didn’t cite Snapchat, scores of millennials are already using the app to send money via Snapcash.
But the challenge will be parlaying that trust and familiarity into a profit, while meeting the regulatory and compliance thresholds required of any company providing financial services. (Last year, the SEC officially warned investors about the risks and limitations of robo-advisers, and regulations of all advisory services have been steadily increasing since the financial meltdown of 2008.)
Stephen Alred Jr., a financial planner and founder of Ignite Financial, notes that the big problem in the robo-advisory space is simply the limited amount of commission that customers can be charged. “Traditional robo-advisers have to have an extremely high assets-under-management requirement just to break even,” he says. “I do not believe Snapchat will disrupt financial services any more than its predecessors in this space. Traditional firms are picking up on what Betterment and others are doing and have begun to adjust accordingly.”