The financial services industry needs some fresh blood. For too long we have been dealing with outdated systems attracting old-fashioned investors, and the market is starting to stagnate.
The problem is, the next generation of potential shareholders simply aren’t interested in the way most companies raise capital – and it’s creating a huge missed opportunity.
Millennials: does the appetite exist?
On paper, Millennials might not seem the most lucrative target market to companies. It’s no secret that they are worse off than their parents’ generation; half of people aged under 35 are finding it harder than ever to get on the property ladder. And even when they do have cash in hand, many would rather spend it making memories than material purchases.
However, behind this veil of austerity and experiential living is a demographic that understands the value of financial planning. Millennials are Generation Sensible – almost three quarters have been saving for retirement since their early 20s – they just aren’t interested in investment as a means to shore up their future.
Making the market more accessible
What is stopping Millennials from exploring the investment market? The answer lies mostly in two contributing factors:
Speed and complexity – under the current system, investors need to jump through (often expensive) hoops to invest in a company. They need a banking account and a brokerage account, they may be dealing with multiple third parties, and the whole process takes weeks at a time. Remember that Millennials are used to having information at their fingertips and making instantaneous decisions. Buying shares today requires real stamina.
Cost of entry – just as they have been priced out of the housing market, Millennials who are willing to negotiate the complexities of the stock market or private investment models simply don’t have the available capital to get involved. The price of shares is a huge barrier to entry.
For these reasons, less than a quarter of under 37-year olds think the stock market is the best place to put their money. Contrast this with the fast-paced, digital transactions of the cryptocurrency market, where Millennials are five times more likely than older adults to invest in currencies like Bitcoin. These statistics prove that it’s not lack of appetite causing the problem; it’s the outmoded way in which enterprises are raising capital.
Creating cohesion between investors and customers
Given that Millennials aren’t as cash rich as older investors, it’s easy to see why some companies write them off as a target audience. However, they may pay a high price for this approach.
Why? Well firstly, to be successful, businesses need a continuous influx of potential new investors. Their current shareholder base is only going to get older, and today’s market newcomers will be tomorrow’s big earners. Gain their trust now and future fundraising opportunities will be there for the taking when Millennials are ready to settle down, start a family, and begin some serious financial planning.
Secondly, the most productive relationship is one in which investors are also customers and vice versa. As we touched on in our recent blog on big brands getting closer to shareholders, cutting-edge organisations often experience a disconnect between their investor demographic and their typical user. There needs to be more cohesion between the two.
Bringing investment into the digital world
So, if enterprises truly do want to grow their Millennial investor base, how do they go about it? The answer lies in financial asset tokenization.
Using tokenization to raise capital is an easy way to cut out the middlemen that make current investment models slow and expensive to operate. In a world where people can listen to any song in one swipe, or find out the answer to every possible question with a rapid-fire search, the concept of quick transactions is incredibly appealing.
Tokenization is a much speedier, cheaper way to help Millennials explore new investment opportunities – and not just because of its operational model. By converting physical assets into digital tokens, companies are able to offer fractional shares for the first time. This opens up shareholding opportunities to a whole new audience, who otherwise could not have afforded to get involved.
And the fact that tokenization is entirely digital is also a huge draw. Millennials are very environmentally conscious; this generation is the main driver of sustainability in business culture, so anything that dematerialises the investment process is very well received.
Working with industry front-runners
With the audience interested and the technology available, what financial businesses need to realise is that Millennials aren’t an investment opportunity for the future: they are a key focus right now.
There are already companies like Own working with enterprises to engage younger investors through tokenization. Our product ecosystem is intuitive to the way Millennials’ minds work, creating digital opportunities to connect with companies and invest in asset tokens via the blockchain.
Not only that, tools like our FAST Platform, Decentralised Share Register and My Own App are enabling organisations to build long-lasting relationships with these investors. In a world where short-form text messages and social media updates dominate conversation, we are giving companies the ability to conduct their business digitally – from corporate actions and voting, to company updates and dividend payments – and get results quickly.
Build it, and they will come
Engaging an emerging investor audience requires a fresh approach. Companies need to embrace the tokenization technology that will empower them to rip up the investment rule book and drive future growth.
By stripping away the complexities and costs of the current market, businesses will reveal a faster, leaner way of working that fits in with busy modern lifestyles, and empowers them to attract younger, more ambitious investors.
You’ve heard of the saying build it, and they will come? We’ve already built it – now it’s time to watch the Millennials come forward.
Discover Own’s tokenizing technology for financial services and attract new investors for your business.