The pitch to millennials and Gen-Z investors

Chip Castille, CEO and founder of GoalBased Investors; Michelle Tran, SVP, head of enterprise sales at Vestwell.

Transcription:

Announcer: (00:07)

Aaron Klein. Thank you very much for that message. I think what you had to say complimented very well with what Toby and Julia had to present in the first segment. So thank you to our first two segments of the day. The third and final segment focusing on tech and client experience is the pitch to millennials and gen Z investors. Please welcome Brian Wil Heimer, chip Castile and Michelle Tran.

Brian Wallheimer: (00:30)

Well, thank you everyone for coming out today. Appreciate it, excited about this discussion with chip and Michelle I'm gonna let them introduce themselves a little bit more so that we get a feel for who they are, what they do, and then we'll jump into the conversation.

Michelle Tran: (00:50)

Thanks Brian. Good morning everybody. My name is Michelle Tran. I lead enterprise sales for a 401k platform called vestwell. We're a digital modern 401k platform. We work with a number of partners in the financial services space. My background has been in a number of financial services, companies, asset managers I actually fund fact worked with chip back in the day when we were both at BlackRock, but I've been at apex and a number of startups. I also am the co-founder of NYC FinTech women. We are a 10,000, member, community organization, and our goal is to empower, connect and promote women in FinTech. Thank you.

Chip Castile: (01:27)

I'm chip Castile founder and CEO of Goal based investors. Our product is lasso and lasso is a new offering in the marketplace designed to bring together advisors and people looking for financial advice, investors. And we do that over a platform that's very familiar to, the audience that we're talking about today, prior to founding GBI, I was a global retirement strategist at BlackRock and I ran the U.S Define contribution business at BlackRock for several years. I was on the team that invented the target date fund way back in 1993. So when we talked about this, I felt like maybe I'm a little bit too old to be talking about gen Z and millennials. but hopefully I can add something of value here, and I also developed black rock arbitrage system, which has been maybe many of you know about that. And, it's been pretty successful in the marketplace using it in ways that we'll be talking about today. So thank you for the opportunity to be here. I'm looking forward to this conversation.

Brian Wallheimer: (02:36)

Great. Well, I'll start out by saying that this doesn't apply to me because I'm gen X by nine days. So all these millennials and gen Z people you're going after this on me, but the big, the obvious part of this that we're gonna talk about is the we talk about the great wealth transfer all the time, all these billions of trillions of dollars. They, so they're gonna be transferred to these, these millennials and gen Z's in the next, few decades. And, we see stats all the time that these generations are less interested in working with financial advisors than gen Xers boomers, those sorts of folks. So I guess, I wanted to open it up just to talk about Tech's role in changing that, obviously these are more, digitally native generations. They say gen X is the first generation that kind of had to straddle both sides of that, but these generations, they grew up with computers in their homes. They grew up with, social media all of these sorts of things. So how does tech play a role in starting to capture their attention and bringing them to the financial advising world?

Michelle Tran: (03:41)

Yeah, I'll go ahead and kick off, so I think to your previous comment in terms of do these generations need financial advisors? Are they interested in financial advisors? they don't really know that they need financial advisors until they actually do so. How do you capture them at the moment when they do right, like, and we all know this in our line of work is that you wanna capture the client when they are making a life moment. You wanna capture them when they're interested, I worked for an organization called harness wealth and what we did was really pair individuals who are going through big life moments, typically liquidity events. So they held on a ton of, their early developers founder and their company's going public, or they're getting acquired. That's when they definitely need a financial advisor, but how do you attract them in, right. And it comes down to the technology. A lot of these cases, you wanna build that trust with the millennials. And I'm also a very old millennial, so I'm not in the middle stage of the millennial. And I think I meet cross gen Z in some different categories, but it is, it comes down to that technology experience in the beginning. How personalized is that technology experience nowadays, and we all experience this is that you need to have a very personalized user experience to build trust with that technology app. And that's how you get the interested investor in they do need financial advice. I think there is kind of a misconception that, they're not interested, they just don't know that they need it and they just don't know that they're interested. And so how do you get them in with the technology? And that really comes down to how do you personalize it? How do you bring in that data? Are you using platforms that bring in held away accounts? Are you showing them demographic information? Are you showing them personalized financial planning information? That's really what you need to use technology for and really to get them in the door. And then that becomes a flywheel for other services.

Chip Castile: (05:26)

So I, kind of, again being the older person on the panel here I wanna look back a little bit at the, kind of the history of financial services. And I, see what we're doing right now is we have an opportunity to correct past mistakes, but want hear some of the conversations, Michelle's not part of that. I think what she said was right on, but a lot of times, and the mistake that we make is we try to ask our clients to understand our services using our own vocabulary in our own terms. And, anybody who ever offers a service using our client's terms and our client's way of understanding the world those segments take off and I like target date funds is the best example because I was, involved in that and we, were very intentional about it. And so what we said was, we don't want to teach people about targeted funds and mass allocation service. It rebalances for you. We don't want to teach people about asset allocation. Why would we do that? It's a complicated subject, People have jobs they're trying to be good at their jobs. Why are we asking to do something that took us a long time to learn? Let's put asset allocation into the fund. And all we really have to do is ask them a couple questions that they know how to answer, when do I want to retire? a couple of different variations on that of target date funds have evolved. And so that, we met them on their side of the table. And as you all know, target date funds are kind of one of our more successful categories in financial services over the past 30, 40 years throughout 30 years. Another example was I retire. So when we started out building, I retired BlackRock, what we said was we don't want to ask people to think about things like how long are you gonna live? What a depressing way to start a sales conversation, when are you gonna die? and so what we said was let's, take insurance company practices and bring that into the problem. And we only need to ask people four questions. Like how much do you have today? how much can you save going forward? how much risk can you take in terms of when we presented risk in ways of adding uncertainty to the outcome? and how long can you wait? And so those four questions are all things that people can control. And so when we put that into that tool, it was when we did the market testing on it was like just cathartic. The people that did the using testing, they were just so excited about it because they felt like this is the first time I understand this problem that I can interact with it. But again, the same lesson we were using terms that they understood. We did not ask 'em to learn about how returns compound over 30 years. We didn't ask them to learn about mortality tables. We didn't ask, 'em learn about sequencing, risk, all that other stuff we just asked them to. We put all the expertise into the product. So, I'll stop there, because there's follow on comments to that, but I think we're gonna get to that to the ither question.

Brian Wallheimer: (08:26)

Chip, you keep saying, you're the old guy on the panel. I tried to give myself some of that. I was like, when I pointed out I was the gen Xer.

Chip Castile: (08:35)

I have the greatest hair on the panel.

Brian Wallheimer: (08:37)

JD power last year, put out, a survey on customer satisfaction with different financial service companies or mobile offerings and wealth management was right down at the bottom right behind our credit cards, banks, insurance companies, so if we're talking about capturing the attention of these generations, why do we think that wealth management, isn't higher up in those rankings and what does wealth management need to do to, fix that problem? And, is that even the problem that needs to be fixed? I suppose?

Michelle Tran: (09:15)

Well, I think it goes back. One of the comments that chip made is like how do you speak about investing in planning in a common language? Right? So one thing we do at Vestwell is, we've done a lot of studies to, how do we engage that participant in that saver? That's using our platform, they're investing in 401k. They know nothing about 401ks, probably they don't know nothing about investing. They're like, is this a mutual funds? Is this ETF? What does deferral mean? What does contribution mean? Right. And so we're trying to really write and plain English what they should be interested in. Do you wanna put more money in, how much do you wanna save each month? So really plain English. I think that one of the challenges that wealth management has is that they're, not necessarily speaking to the audience as much as they should. And, part of that is that language piece, but there's other things too, that millennials and gen X are really focused on. They're focused on their values, right? Does this organization align with my value? for example for a Robo advisor, are they offering customized impact investments? Are they offering ESG? how are they aligned with my value? And it's a very personalized experience too, when you think about social impact there's a lot of neobank now to have launch that are very specific into what type of community are they focused on. You have Kindley that just raised a series, a 15 million, I think last week. And they're focused on the black American community, there's Greenwood, there's daylight, which focused on LGBTQ community. And so you see a lot of these fintechs, which are really, focused and speaking directly to gen X and millennials, because it aligns with their values. And that's where you see success there. I think the other piece too, is that there's just different priorities, right? When you come to this generation of this age range, how do you continue to show, as they progress in their life stages that they need wealth management or that they should have wealth management. So I think that comes back down to the personalization of data and personalization of that experience. I have multiple children. So at this point, anything that tells me how I can save for my kids and not spend too much money, cuz my husband wants to buy a minivan is gonna get my attention retirement's a little bit far down the line for me, but right now I'm focused on my life expenses. And so knowing who I am knowing what I'm focused on is really important and customizing and that curated experience.

Chip Castile: (11:38)

So you think, again the one of the big mistakes that we make is to try to use financial literacy and education as a way to engage with these audiences. And we know from, the DC space, it just doesn't work and it's not fair to the participants or intended clients to expect them to master difficult financial, material. So, I used an example, like if my son came to me and said, Hey, would you teach me how to throw a baseball? And I said, okay, well, listen, here's your problem. You're trying to move a spherical mass through a gravitational field using rotational velocity. Okay. So let's start there, let's get a book out and let's start working on this. That's basically what we do when somebody says, Hey, let me teach you about investing. Investing is a hard problem. Nobody has intuitive feel for compound investing. We just don't, 30 years of compound investing. I can't, tell you what it is. I have to get a tool out. So, that's the approach that we take now. What, what really coming back to the baseball analogy, how people actually do this is they say, watch me throw a ball, copy me. And you learn imitation is the easiest form of learning. And so, what we're doing is we say, what are the behaviors that, that these people are using, right? They're very tech adapt. What are they actually doing? What are they like? And can we design our offering, to hit those check those boxes? And so they like lightweight experiences. I used the retirement app the other day. And on the third question out of, I think it was probably like 25 questions. They asked me if I had ever been divorced, I had no idea what kind of value they were gonna give me, but they're already getting to that level of detail and that level of personal information without off giving me any kind of indication of value of what they're gonna, these people. I don't like it either, but nobody wants to go through that level of disclosure. Your financial information is kind of like the second, most important or sensitive most private data set that you have, right? So nobody wants to give it out. So you have to be very lightweight in your approach, in what you're asking them. It has to be immediate and fast. They have to be done in four or five minutes. When you look at what these generations do with tech, they look for interactive engagement. They want somebody to be on the other side of what they're swiping on, or how they're interacting they want control over their identity. They don't want to let all of their information out into the wild where any, anybody can chase them down and use 'em as a sales lead without their permission. And finally, they look for community experiences. And so our offering, and I think everybody, if you want to be serious in this space, you have to consider, which are these kind of elements. Are you interested in putting into your, your effort into engaging with these people? Because in that case, you come back to my opening comment, let's engage with them on what they're comfortable with, on what they understand and what they like to do. And these to me are the main dimensions of how these people are interacting in tech space.

Brian Wallheimer: (14:58)

Let me ask too, because it sort of, when you talk about, meeting them at their level and talking about what they're interested in, it almost sounds, is there a next level to that though? Because like, I've got three kids, Michelle, we'll connect here on this and don't knock minivan by the way, they're roomy. And they're great to they're Mel. My goodness. It'll change your life. We'll talk later but my kids who wants to eat their vegetables, right? So like I walk them in some vegetables that they like, and sometimes we have two vegetables for a night and I go, Hey, look, I know you don't like the broccoli you like, the corn, eat the broccoli first, get it over with. And then, but you're almost talking about doing the opposite right? Of like, let's get you in the door with something sweet that you're gonna enjoy. And then do you have to take that next step then and say, look, this is gonna get a little bit harder or are there ways to keep it to where they're still engaged in their comfort zone. And then, without getting too complicated in this, I'm just wondering, because I would imagine these investors are much more transient than investors were 20, 30 years ago, older, they're more willing to say, yeah, I'm not happy with this anymore. I'm gonna move. So sort of what's the evolution of that once you get them in the door and you haven't scared them away too quickly.

Michelle Tran: (16:19)

Sure. I think that comes down to what does that platform value back to the individual? And some of it also comes down to the gamification experience too, is that you're giving a little bit and you wanna get a little bit, you wanna, it's that asking that offer. And so what's that information exchange that you're going back and forth, I think to your comment chip in terms of a lot of this information is personal. I totally agree. But yet at the same time, I'm also in the camp of my information's out there. Right? Like they get it, there's enough technology that like scrapes information on me that I've selected, I'll accept all cookies, so you should know enough about me, right. Just given their connectivity with plaid or you're able to pull in information. And so don't make me go through this experience, why I have to add anything. Right. So that frictionless experience has to be there in every single step of the way. I think it is, it comes down to that, what are you giving to this platform or to this organization? And then what are they giving to you at each and every little step? Are you creating that flywheel over and over again to bring in that user? it's a really interesting, thought too, in terms of how do you build community, cuz that's part of it. People really love the idea of community, and what's that multi-player experience that you have out there. Is there someone on the other side, is it a peer? Is it someone engaging with you? Is it an expert, but having that connectivity even in an app is really important, and that helps bring in kind of the right type of user experience.

Chip Castile: (17:47)

So the broccoli example is a great one. It's a classic, I think, example of selling features and not benefits. So here's how we try to get our kids to eat broccoli. It's good for you. It has vitamins, it has nutrients, all this other stuff. But if you would say like to maybe if you, if your child wants to eat fast, if you eat this, you might be able to run faster tomorrow or you keep eating it you'll be able to run faster or you'll have better skin or stuff like that. And so then you're selling the benefits of it. Instead of trying to tell them this is good for you now, it may not be successful because the reality is, like in our all financial goals have four common ingredients. Like how long can you wait? How much can you save today? What are you gonna save in the future? and how much uncertainty can take around the outcome? Well, we would all have different mixes of those preferences. That's what makes this interesting is that our, and so what to get into that, some of us may like broccoli, but that doesn't mean you can't give them an nutritious meal. And so helping them understand. And so maybe giving them a choice to pick your stuff, pick what you want to eat, but do it in a way that you're always gonna get the outcome that's, good is I think a better way of going than trying to get them to like broccoli.

Michelle Tran: (19:04)

Asking that question over and over again. Yeah. In different ways. Yeah. So drive them towards an outcome that it is good for them.

Chip Castile: (19:10)

Yeah.

Brian Wallheimer: (19:12)

Tricking them into eating that broccoli eventually, no it's interesting to say that because I, remember that same thing. I remember the same thing being told to me to eat my vegetables is, you'll get strong, like the Hulk. That was my thing. back the incredible Hulk.

Chip Castile: (19:30)

If you drive from SF to LA, you basically go through the valley, which is a boring drive, but faster, or you can go along. PCA was a beautiful drive, but longer, but people who take the PCH drive, they feel good about it. And once they've made the adjustment for, what they enjoyed in terms of beauty, they feel as good as the people who got there faster. So this idea of giving choice to allow people to find their preferences, even though you both got to LA is important, and we need to do that in financial service. Like you find your preferences, let us put me into a context where you can reveal your preferences and then you're gonna feel much better about the solution that we have. And it doesn't mean that those solutions can all be kind of equal in terms of utility and terms of expected outcome. But you may say I'd rather work longer. I'd rather save more today. I'm still getting to the same spot.

Michelle Tran: (20:24)

I think too, in that experience though, you need to show you need to show the instant benefit, right? Like we're all such short term people now. Right. I need, if I put information, I need to what the value is back to. Right, And so getting them and leading them with like crumbs for them to follow along the way. Yeah, and leading them to that result.

Chip Castile: (20:41)

Exactly. Like we try to do that. If we if we ask you a question and you answer it, we're gonna give you back something to help you feel like that was reason, I should have, that was worth giving that information out.

Brian Wallheimer: (20:54)

The word has come up. I heard it a minute ago, gamification. And there's been a lot of negativity around that word. There's been a lot of negativity around social media when you, when you see the TikTok influencers, whatever we're terms we're gonna use here, there's a lot of negativity around that. but you also just mentioned that we have those short attention spans, right? Why are TikTok videos like I'm or less it's and I mean, I can't count as I get 10 seconds into one of those and I just flip right past cause it hasn't caught my attention in the first five seconds, So you've talked about those as opportunities. I know there's a lot of people who are talking about gamification and social media and negative ways. How do you make sure that you don't fall into a situation where you start getting a negative connotation if you're using those, sorts of tactics.

Michelle Tran: (21:51)

And I think at a high level, you have to be there, right? Like finfluencers, if you're a financial services company, you have to have a finfluencer, you have to work with one or you have to have a TikTok. BlackRock, I think has a TikTok now. I'm sure there's like a thousand disclaimers on that TikTok, but yeah. They solve one, and they partner with a ton of Instagram influencers too. Like I've seen posts that come across, I follow a bunch of mom blogs and they're like, oh, sponsored by BlackRock. And it's a mom blogger and I don't really get like the exact connection, but maybe it's like a branding thing. but you have to be there. Right? So like social media is table stakes at this point you have to be on TikTok, you have to be on Instagram. You have to be definitely on LinkedIn, and then for a lot of these bigger financial services firms. You just disclaim the hell out of it, there's was a recent, New York time article about the finfluencers out there. And you know it does have some negativity because you had forget the name of the guy, but he was kind of touting one type of Bitcoin, one type of cryptocurrency. And it was, he was an investor in the company, and so he got a ton of people buy it and then it went down and so, the story goes and so like, what's that regulation around it. So I think it's, different. The social media comment versus gamification, I think gamification though, if you're looking to attract young users, there was a recent EY study that had, within 10 of the gen Z millennial generation, 51% actually trusted fintechs over national banks only 24% or so said that they actually trusted national banks or that was their first place to go. And, so gamification comes into that play, right? Like you need to get people's attention. We're just in a world, you flip your TikTok in 10 seconds if you're not interested, and so how do you continue to engage? And you see not necessarily wealth management, you see like these, these credit cards that are focused on kids green light and go Henry. And they all use an element of gamification, but they use it in a way to teach kids about investing, to teach kids about money management, and so that's just what, the direction that we're going, right? Like we're all expecting some type of interaction where it's back and forth. And again, that multi-player kind of component, but to social media, yeah, you gotta have a TikTok these days. I don't have one, but BlackRock does.

Chip Castile: (24:18)

I think in terms of social stuff, I would expect the, regulators to start issuing guidance on what's advice and what's not, and provide more clarity there and it'll probably work against some of these people that are on the line of providing some advice, and with their compensation is associated with that. In terms of communication. I think it's a little bit more interesting cuz if you think about what gamification really is. It's a sales tool. It helps you sell a product more efficiently and so you're using concepts that more and more people understand to help them interact with a product in the hope that they'll buy it or use it, and so that gets to the point where it's not gamification and that's bad, it's that some product shouldn't be overused. And so like, I can almost, every product can be overused. I've been drinking water here. If I drink too much water, that would be bad for me. It would be unhealthy, so, but if you get to something like trading, like there's an amount of trading and free trading can be great up to a certain point. But if you're like trading a ton in your own portfolio, trading is based on the idea that you have information about future security prices. That's why you're changing the nature, the positions in your portfolio most of the time. So if you don't really have high quality information trading a lot is not expected to add value to your portfolio. So if you're playing games that push you past that equilibrium point on how much you should trade that's overusing a product that leads to bad outcomes. So I think that's gonna be kind of hard to figure out like what's the right level of gamification and where should it be played, and I think it has to do with if you use the product too much, does it lead to bad outcomes.

Michelle Tran: (26:16)

But is it the company's responsibility to help put some gates on that?

Chip Castile: (26:21)

I think so, but if they don't do it, then what are the regulators response? I mean, I would much prefer to see re the companies themselves realize that overuse of our product is it leads to our diminishment of customer welfare being, it only makes sense. Like, as we all know, getting a new client is expensive as opposed to keeping an existing client. So I can't imagine if you over trade your account, you're gonna run out of money most of the time. And then they have to go back and find a new account and the (25:54) on that's expensive.

Brian Wallheimer: (26:57)

Awesome. Well, we're out of time, but this has been a great discussion. I really appreciate it, if we have any take homes, it's that Michelle's gonna get a TikTok account and a minivan here soon, I'll work on that but thank you all for coming out. We appreciate it, and we'll see you in the next session.