Know your target market! Angling FX products and services toward Millennials is costly and fruitless – Op Ed

Catering for Millennials is very expensive, yet research shows that this large demographic is not interested in investing for the future. On the other hand, the age range between 35 to 45 is less technologically demanding, appreciative of a very good trading system, and is an investment-savvy demographic

There is a very well worn British adage that states “The first generation in a family makes money, the second generation holds or keeps the money, and the third generation squanders or loses the money.”

Whilst it is a cautionary tale that is often used in order to keep impressionable youth in check and ensure they have one eye on their bank balance and the other on ensuring that they can maintain a decent day’s work, there is indeed some truth in it.

When FX firms look to target retail financial instruments to a global audience, demographic is a vital consideration, and it does not just extend to which age group is the largest and the most literate in terms of modern technology that ensures their familiarity with today’s highly advanced retail trading platforms.

There is much more to this consideration than pure deduction, disposable income multiples and technological literacy.

Whilst a very large proportion of research and development budget is being poured by FX firms into the design and production of ultra-modern trading platforms, new ancillary services that are intended to attract the Millennials which are being cited as the next generation of retail traders, thus the investment in such user interfaces and interactive technology to which Millennials have become accustomed in every other aspect of their lives is considered a means of ‘future-proofing’ by FX firms and third party software providers.

With the competitive nature of all of today’s retail brokerages, all vying for a market share in a similar field, and with the exception of those with proprietary platforms and specialist products, the challenge of continually seeking to provide a different value proposition to differentiate themselves.

This is indeed all very commendable and it is one of the factors which stands our extremely interesting industry out from all other aspects of the technologically-driven online world, as we, the electronic trading sector, are right at the very forefront of development and actually create the financial markets environment of the future, not just offer it.

Indeed, this is all very admirable, but what if the younger generation, which demand such interactive services and are the reason why intricate and costly user interface development is such a high priority, have NO MONEY?

Or what if this generation of young, technologically literate Millennials have got some income stream and no burdens such as mortgages or dependents, but do not want to think about the future and do not want to consider building a portfolio in the financial markets business, even if it is provided by a very interesting and highly advanced system?

The generation of people in the age range between 35 and 45 may be fewer in numbers, but are a better target audience than the happy-go-lucky (and in their own way wasteful) baby boomers, many of whose teenage years in the 1960s were by no means occupied by building financial portfolios or acquiring assets, and fewer in numbers yet a better audience than the 20 to 30 age group which are known as Millennials, who according to various studies recently, have by enlarge absolutely no interest in accruing capital.

According to RateSetter, a peer-to-peer lending service, research that has been conducted concluded that ‘live-for-the-moment’ young adults are ‘clueless’ about money, opting to spend a fortune on one-off nights out, coffee, fashion and takeaways rather than securing their financial future.

An astonishing 26% of 18 to 30 year olds do not save or invest anything at all, with 62% admitting that they are clueless about financial matters, according to RateSetter’s research.

In Britain, home to the largest institutional and retail financial center which powers the markets of the entire world, one in seven young people have not considered planning for their retirement.

Indeed, the Millennials have now attracted a less than flattering acronym – YOLO – literally, “You Only Live Once”, admitting in surveys to spending all their money on nights out, fashion and luxuries rather than investing or saving.

On the corner of Fifth Avenue and 60th Street -- i.e., at the opposite end of the block where the iPhone fans were waiting in line -- this young couple staked out a spot with a sign that said "Feed us." I gave them some money; I hope they did use it to buy some food ... Silly me: after the iPhone 3g had been out for a full week, I thought I could stroll right into the Apple Store on Fifth Avenue & 59th Street in mid-town Manhattan, and simply buy one without any muss, fuss, bother, or delay. But when I arrived at 11 AM, I found a line of approximately 150 people waiting outside in the broiling sun, not seeming to move forward at all; it turned out that the Apple store "concierge" folks were letting them in in groups of ten, when the previous ten had been taken care of. When I asked the woman how long she had been waiting, she said, "Four hours" -- she had arrived at 7 AM, having already determined that the AT&T stores were sold out throughout New Jersey and Connecticut. Well, I'm a gadget freak and a Mac fan, but there's a limit to my passion for such things; four hours was just too much. So instead, I decided to take a bunch of pictures of the people who were in the line. Of course, I have no idea whethere the people queued up in front of Apple stores in other cities (or at other stores here in NYC) are similar to this group ... but I'm inclined to think that they are. And if that's true, then the demographics of this group -- in terms of age, gender, nationality, ethnic groups, etc. -- is particularly intriguing. I saw only one guy dressed in a corporate uniform of suit and tie; Apple may be trying to break into the "enterprise" market, but that's not who was standing in line for all those hours in the sun...

As a result, 35% of this agegroup does not envisage ever being able to own their own home, whereas 25 years ago, when times were a lot tougher and the country was substantially poorer (when I grew up in the late 1970s, people passed away in the winter, there was garbage piled up on the sides of the streets, 3-day working weeks due to inability to pay salaries, ice half way up the inside of windows, the average annual salary was £2,800 per annum for a professional, and £340 per quarter for a medical worker) yet 79% of the population owned their own home by the time they were 35.

With the YOLO generation living for the here and now, over half of those surveyed admitted to frivolous spending on takeaways with 53 per cent buying takeaway food at least once a fortnight and 77 per cent spending up to £20 each time, equating to over £500 a year.

The survey also found that when they do put money away, the YOLO generation are doing so for holidays and travel abroad, with sixty per cent admitting to stashing their cash for trips away.

Indeed, RateSetter found that many cited the low interest rates offered by banks as a reason for frittering capital away, however there was no mention of other retail services that are on offer.

By contrast, Generation X – which was born into 1970s austerity and a semi-bankrupt national economy, has weathered two massive financial crises and is much smaller than the preceding and succeeding generation, is prosperous and interested in building portfolios by comparison.

Still young enough to appreciate modern technology (although not born into it like the Millennials), yet financially astute, hard working and responsible, the 35 to 45 year olds are an absolutely perfect target market for top quality electronic trading firms.

An industry professional who agrees with this is Goldman Sachs Head of Thematic Research Hugo Scott-Gall, who has provided an insight into why Generation X is a vital demographic.

Indeed, they may not be engaged by the latest graphics-heavy GUI, or respond to geotargeting by ultra-modern and on the pace marketing departments, but their investing potential is higher than that of both their parents and children. Mr. Scott-Gall explains why this is.

“Generation X is the genration born between 1965 and 1980, and they are a demographic which is smaller than the baby boomers and the Millennials” he said.

“They are in the sweetspot for consumption and are at an age where consumption peaks. They are making very important spending decisions, big ticket spending decisions” – Hugo Scott-Gall, Head of Thematic Research, Goldman Sachs

Mr. Scott-Gall continued “So economically they are very significant. People of the Generation X account for 25% to 30% of all consumption in the US yet they are the least talked about generation. It is therefore very important for companies to look at how are htey spending differently, where are they spending more, and where less than the baby boomers that went before them.”

“Members of Generation X are are spending more on their children, which is fascinating. Education has become expensive, but they are overweighting that as an important category of expenditure, so broader children realted expenditure is a growth area compared to previous generations.”

Mr. Scott-Gall also stated “They spend more on housing. This is partly due to price inflation, as houses and general accommodation costs more these days, however they are spending less on cars, as only 3.5% of their income is spent on cars, significantly less than the previous geneation which spent 5.5% on cars, which is a big difference.” This is further testimony to the frugality of 35 to 45 year olds who invest in assets and savings rather than depreciating lifestyle accessories.

It therefore should be noted that as education and property investment is more of a priority for this generation than depreciating consumer goods such as cars, their propensity toward understanding what is of investment value and what is not is generally higher than that of the generation either side of them.


Hugo Scott-Gall, Goldman Sachs

Mr. Scott-Gall emphasizes that lessons learned during a difficult and fluctuating economic period has led to the astute approach of Generation X “Generation X had a tough time” he said.

“You could argue that they have been unlucky” continued Mr. Scott-Gall. “They saw two big falls in the equity market, end of the bull market that peaked in 2000 and 2001 and then the financial crisis of 2008 and 2009. These were scarring and very significant events, and they have changed the attidude of Generation X toward how they save and how they invest. they are more cautious and more frugal than the baby boomers.”

“How they choose to spend the money that they have, how much they have saved as they need to plan toward retirement, all of those things are going to impact overall consumption” explained Mr. Scott-Gall.

In conclusion, Mr. Scott-Gall explained that this is a vital demographic for companies to pitch their products toward. “Yes you may not hear about them, yes you may not read about them or write much about them but they really do matter for consumption so how they evolve over the next ten years and how much they spend and how they spend really does matter.”

Bearing all this in mind, FX brokers should most certainly focus on the 35 to 45 year old demographic as this is a very good quality market indeed.

Main picture: Long Acre, London, 1991. Life was tough, but people got into the habit of saving and investing for the future

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