Articles - Opportunity Knocks

This September will mark the arrival on the scene of a new generation born with a silver spoon in their mouths, or at least silver-plated. Those who have for years advocated that encourage saving and investing early will create a new wealthier generation are about to witness the emergence of the first batch of 18-year-olds with maturing child trust funds. This is particularly significant as a large amount of these will not come from traditionally wealthy backgrounds and are not part of the standard trust fund set.

 By Tom Murray, Head of Product Strategy for LifePlus Solutions at Majesco.

  However, thanks to a government initiative, a large number will reach adulthood in possession of a significant asset before they even start their working lives.

 The then Chancellor Gordon Brown setup the child trust fund scheme with the idea of creating a situation where “every child has assets and wealth and that no child is left behind”. With the government providing an initial deposit and a booster at the age of 7, the idea was to ensure a basic level of investment and allow others such as parent, godparents, grandparent, to top up the amount and therefore speed its growth. The equity of the system was boosted by giving twice as much to those from disadvantaged backgrounds.

  The concept of inculcating habits in the young is an old one. Give me the boy for the first seven years and I will give you the man is a maxim of the Jesuit order, widely attributed to their founder Ignatius Loyola but also by some to Aristotle. The idea that the formative years establish the type of person that a child will become is widespread and its essential truth is widely acknowledged as being true.

 Given the early start to the investment process that is automatically given to those who have been part of the child trust fund scheme, this process should have inculcated a good savings habit early in the child’s life. The opportunity is now there to build on this to cement good savings habits throughout the child’s life by persuading the majority of those with maturing funds to keep going with their investment approach. For those who have gone from school straight to work, the auto-enrolment process is also nudging them towards wealth accumulation and thinking about their long-term finances. This is creating a golden opportunity for that generation to plan early for their long-term financial security.

 The key will be to make it easy for them to continue their savings, in order to build on this very solid foundation and produce a new generation who are automatically inclined to look after their financial health – a group who see monitoring their affairs as something they would do as assiduously as they would monitor their looks and who would go to a financial adviser as readily as they would go to a gym.

 In order to achieve this, we have to remember that this generation, Gen Z, are digital natives. This means that any solution must be a primarily digital path, first and foremost. Companies wishing to engage with these young people need to be able to interact with them in the way that is familiar to them. Digital portals, smart apps and real-time information are essential to engage them and enable them to see what they have already accumulated. It’s also key to provide them with the tools to see what the future possibilities are if they continue to let their investments grow and what options they have to build them even further.

 For those that have moved into the workforce, these are essential tools if we are to ensure that the good habits of childhood are not dissipated in the excitement of getting access to what will be, for many of them, their first independently owned financial asset.

 CTFs were initiated before the cloud-era and therefore much of the existing data is residing on traditional systems. Making it easy for the policy owners to transfer these to new products on modern cloud-based platforms, platforms which can deliver the type of online control that Generation Z demands, is an essential part of any strategy for holding on to these investments and letting them grow.

 Providers who haven’t got the capability to provide the digital experience that these youngsters demand will face the prospect of losing their customers, either because they wish to spend the money immediately or because they want to move it to a financial provider more on their own wavelength. Those without these capabilities need to look immediately at how they can provide the type of digital ecosystem needed. There is a lot of investment at stake for those who are bold enough to see the opportunity.

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