by Simon Bond

Millennial values

By 2020, Millennials will comprise more than one of three adult Americans. It is estimated that by 2025 they will make up as much as 75 per cent of the workforce. Given their numbers, they will dominate the nation’s workplaces and permeate its corporate culture. Thus, understanding the generation’s values offers a window into the future of corporate America which is still the biggest consumer market in the world.

It will be a world that is radically different than the one whew those who wield power today have grown accustomed to leading. The Baby Boom generation, born between 1946 and 1964, has made confrontation the touchstone of its existence.

For example, a recent Intelligence Group study found that almost two-thirds (64 per cent) of Millennials said they would rather make $40,000 a year at a job they love than $100,000 a year at a job they think is boring.

A recent survey by MFS Investment Management found that nearly half of Millennials “never feel comfortable investing in the stock market”. The survey also showed Millennials keep more of their assets in cash, less in stocks, and, in spite of their relative youth, have a shorter time horizon—less than five years—for their investments than Boomers or Gen Xers.

A report by UBS Wealth Management in the Americas described Millennials as “the most conservative generation since the Great Depression” with regard to its savings habits.

According to UBS’s research, the average investor aged 21 to 36 has 52 per cent of their savings in cash, compared to 23 per cent for other age groups. Clearly, one reason for this avoidance of the stock market stems from the same experience of extreme volatility and risk that the Millennials’ GI Generation great grandparents experienced when they were coming of age during the Great Depression.

An Accenture survey found high levels of mistrust of financial institutions among Millennials and a greater reliance on the internet, social media, and personal networks for financial advice. As Kelsey Raycroft, a Boston-based Millennial put it, “The personal connection is important to me, especially with money stuff ... When I see these commercials with big companies, I’d rather go to somebody I trust.”

In fact, this deep level of distrust toward the banking industry led the authors of the Millennial Disruption Index to identify the financial sector as the industry most likely to experience severe disruption in its business model.

Their three-year research study of more than 10,000 Millennials also found that of the ten least-liked brands among members of this generation four belonged to the nation’s most powerful banks—J.P. Morgan Chase & Co., Bank of America Corp., Wells Fargo & Co., and Citigroup. Seventy-one percent told the researchers that they would “rather go to the dentist than listen to what banks are saying.”

Furthermore, this generation of careful consumers and selective savers is perfectly ready to embrace a future without banks. Already, Millennials are three times more likely than Boomers and twice as likely as members of Generation X to be “unbanked,” i.e. have neither a savings nor a checking account.

When asked, about 70 per cent of Millennials thought that the way we pay for things five years from now will be totally different and one-third of them told the Millennial Disruption Index researchers they didn’t believe that they will need a bank at all in the future.

The source of this disruption is perfectly clear to Millennials, even if it’s not a future that bodes well for the banking system. Almost all (88 per cent) of Millennials do their banking online and half of those use their smart phone to do so.

This experience leads about three-fourths of Millennials (73 per cent) to be “more excited about a new offering in financial services from Google, Amazon, Apple, Paypal or Square” than from a nationwide bank. Since both the technology and the financial wherewithal to offer such services exists within these firms, the study’s prediction of “seismic” change in the near term future of banking appears to be at least as realistic of a vision of the future.

It is possible that the generation’s lack of interest in using traditional banking services could be cured if the industry offered new, high tech products and services or maybe changed its advertising approach. Another possibility is that community banks will enjoy a rise in popularity with Millennials since their name expresses an affinity with Millennials’ favorite environment.

As Gene Smith, born on the cusp between Millennials and Gen X, so eloquently wrote in 2012 upon his resignation from Goldman Sachs after a very successful 12-year career, “I have worked here long enough to understand the trajectory of its culture, its people and its identity.And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.”

If Millennials continue to avoid investing their money in the institutional titans of the financial world, those firms that today are most intent on focusing CEO's attention to the bottom line, may well find themselves with less financial clout to exert that kind of influence in the future.

Clash of Cultures Undermines Wall Street's Future

The actual experiences of eight Millennials who started their careers in the financial sectors were documented in the book, Young Money, by Kevin Roose. He documents the disillusion each of them experienced during their first two years of employment at companies whose brands are among those least liked by Millennials—Goldman Sachs, Citigroup, Bank of America/ Merrill Lynch, Wells Fargo, and J.P. Morgan Chase—as well as the German (Deutsche Bank) and Swiss (Credit Suisse) versions of those companies.

During their initial year of employment these entry level employees were expected to work twenty hours a day (a 9 to 5 workday meant 9am until 5am), often every day of the week including weekends. At work, their lives were at the mercy of irrational, bullying older bosses that saw hazing as a necessary ritual to sort out the good from the mediocre. As a result, this diverse group of new employees rapidly lost their health, relationships, and, in most cases, their pride.

Talent in this particular world of work was meant to be torn down and task leadership consisted of creating a fear of failure so intense it drained the creativity out of the group. No attempt was made to build trust or teams.

But the odds are that banks, along with other parts of the financial sector, will continue to lose ground with Millennials as investors because of the fundamental mismatch between the generation’s beliefs and the culture of Wall Street, let alone to demonstrate how the work these young financial apprentices were asked to do would contribute to the greater good.

Their stories took place against the backdrop of the Great Recession as jobs became extremely scarce and graduates were more ready to trade their ideals and personal lives for a six-figure income in the first year after graduation. But as Roose documents, money soon became less of an allure to Millennials who were more interested in finding meaning in their lives.

Of the eight Millennials whose stories Roose chronicles, only one continued working on Wall Street. Two others joined the world of finance in Latin America but focused their careers on economic development. Three of the other five joined high tech startups, one went to work for a hospital and one went to work in community banking—outcomes very much in line with Millennials’ rankings of ideal employers.

Even though the eight people whose lives are captured in the book hardly represent a statistically reliable sample of all Millennials, their work experiences accurately describe an industry culture that is completely out of synch with Millennial values.

William C. Dudley, president of the Federal Reserve Bank of New York—the arm of government that interacts with Wall Street more than any other—called this outdated, in-bred, insular culture just as much of a threat to the success of the industry as the changes in risk management practices mandated by the Dodd-Frank financial reform legislation passed in the wake of the financial system’s collapse in 2008.

The power of the Millennial Generation was first felt at the beginning of this century in consumer markets, especially those such as entertainment and fashion that are focused on younger customers. Then, in 2008 and 2012, the Millennial wave of disruption entered the world of politics, with the generation playing a critical role in President Obama’s election and re-election.

More recently, it has begun to transform the world of work.

Furthermore, demographic trends make it clear that over the next decade increasingly greater numbers of Millennials will be elected to office, giving them the power to enact laws that can change how corporations are governed and what responsibilities those entities owe to all of their stakeholders.

Those companies that dedicate their future to changing the world for the better and find ways to make it happen, will be rewarded with the loyalty of Millennials as customers, workers and investors for decades to come.

Those that choose to hang on to outdated cultures and misplaced priorities are likely to lose the loyalties of the Millennial generation and with it their economic relevance.