"FAIRY" theory for serving Financial Needs of Generation Y

"GTGNPOSTTYL"-did you get the meaning of it, or are you waiting for the translation, if you are still waiting, then you are on the opposite side of a generation that "defines the boundaries of new breed of consumers". The meaning of the online shorthand used by "Generation Y" of today's market is: "Got to go now, parents over shoulder talk to you later."

Generation Y is a segment born between 1977 and 1995, is transforming industries. They are now entering the workforce and becoming a major disruptive force in how products and services are marketed and consumed. In today's consumer world, young adults are the "darlings of virtually every major retailer and consumer goods manufacturer" all over the world. Earlier research by a well known research institute Filene reveals some starting facts about young adults:

• " Today's youth and young adult markets are larger than even the Baby Boom generation (a generation born between 1946 and 1964)
• " Age, marital status and the presence of children in the household are key factors in segmenting the young adult market.
• " Today's young adults have limitless access to information via the internet about products and services, and they use that information to become better shoppers. They understand their market power and raised their expectations.
• " Young adults are active consumers of financial products-savings and loan instruments as well as investment vehicles.

According to a study by the Life Insurance Market Research Association (LIMRA), two broad financial challenges that the financial service providers will face over the next two decades are: First, retaining money already accumulated from the consumers in the Baby Boom generation; and second, attracting new investments in their products. The industry can't wait till Baby Boomers reach retirement to introduce itself to younger generations. Rather, now is the time to educate young consumers and introduce products and services that will help them achieve their goals.

The Limra study suggests that Generation Y lack a clear picture of what the term "financial services" means. The lesson here for the financial service providers would be to define their products and services so that young adults will understand what they are and what they can do. One interesting approach suggested by researchers for becoming the Financial Institution of Choice for the Generation Y is, "Be there for them in all their Life Events". What does that mean? Well, I named it "FAIRY"- Focusing, Attracting, Inventing and Retaining Young-adults. Some strategic suggestions are as follows:

• Offer them their First Credit Card: Many card providers reason that 21-years-olds who build big balances today will use plastic even more as they age. Banks flood college students with direct mail pieces and place pop -up ads on popular Web sites to offer credit cards. But research shows that campus giveways appear to be the best way for catching 21-years-olds where they study. Representatives from financial institutions set up tables on various campuses handing out application forms and logo-emblazoned caps, T-shirts and DVDs. Students may claim that they'll just fill out the application and keep the shirt, but once they get the card, they start using it. The lesson: never underestimate the power of a free T-shirt to a 21-year-old.
  
• Offer them the First Car Loan: Filene research confirms that purchasing one's first auto is an important event in the lives of a young adult. Therefore, it is only a good idea to reach out the young adults early in their financial lives, communicate with them before the dealer makes a deal with them.
  
• Offer Student Loans: Financial institutions are often regarded as trusted advisors and are well positioned to develop college tool kits that package information; outline budgets for discretionary and essential expenditures; where to shop, eat and bank; and other resources available to college students. As financial institutions evaluate products, services, business models and marketing programs targeted to college life events, they need to consider the needs of both the student and the parent. Both college students and parent have tremendous education needs surrounding preparing for and paying for the college. Offer products and services to service these needs, try being there first.
  
• After College-Starting in a Real World: The transition from college to a real world adult is often more dramatic than the event of entering college. Today, when young adults graduate from college, they leave the "Bank of Mom and Dad" and face the task of managing finances and selecting a financial institution. Experts write that there are endless opportunities for the marketers to step in and assist in the transition from college life to the real world. For example: financial services companies could provide free seminars to first time employees fresh out of college for helping them establish an appropriate investing blueprint. A one-hour seminar could potentially generate a desirable client base of lifetime, high yield customers.
  
• Love, Marriage and: The median age at marriage is 25 years for females and 27 years for males. When a couple gets married, a major life event, critical financial decisions are made. Who will be the primary financial provider? A newlywed couple's financial partner selected immediately after marriage may become a lifelong partner.
  
• Having a Child: Young adults entering their prime childbearing years will also have an impact on marketing strategies. Parents of the next boom of babies are expected to be a bit older and more established than those in the past generations. With the soaring costs of educations, many Generation Yers will want to start saving for their children's college expenses. Financial Institutions that identify this trend and respond as it emerges will position themselves for growth and loyalty with Generation Y members and their children.
  
• Financing The First Home: Young people are attracted to buying homes because the mortgage industry now offers products that require little or no down payment. The industry needs to recognize that there are many people who would like to buy homes but may lack the savings required for down payments. Also, singles are now more likely to purchase homes that in the past. They no longer feel a need to wait for marriage, which is being delayed longer than in the past.
  
• Saving for Retirement at 21-Investing: Members of Gen Y understand that saving for retirement is on their shoulders. Young adults hear more about the importance of investments and home ownership from their parents than ever before. Many young people today are making a lot more money than their parents; who may have lived from paycheck to paycheck. So a program that allows young members to invest small amounts may generate considerable interest can get them started, and in the future they can increase the amount of their periodic investments.
  
• Is it all Online? According to a December 2003 Pew Internet & American Life Project report just over eight in ten young adults, ages 18 to 29, use the Internet. Web sites need to be interactive and focused. Generation Y members give a provider three to seven seconds on its home page. If the site is not organized according to acceptable Web standards, they move on to a site that's organized to serve them better.

Therefore the answer of the burning question in today's financial industry, "Who will emerge as the Financial Institution of Choice for Generation Y?" is that "It will require strong strategic orientation.

Dr. Hadi Salavitabar, Dilara Khan and Mr. William Spearman

Mid Hudson Valley Federal Credit Union (MHV), a community chartered credit union with eight branches in New York is recognizing the fact of reaching and serving the financial needs of Generation Y and taking strategic approach to be effective. One of the approaches is to develop partnership with local high schools, colleges, and universities and offer them financial products and services to best satisfy the needs of the future market of Gen Y. In an effort of working in this direction, the School of Business at State University of New York at New Paltz invited MHV's CEO Mr. William Spearman and Management Trainee, SUNY, NewPaltz's MBA graduate Dilara Khan on February 23, 2006 to visit the campus and discuss different areas that the two party can work together to best serve the target group. The Dean of School of Business Dr. Hadi Salavitabar took the MHV's representatives to the campus tour and invited them to a lunch after the meeting.

Dilara Khan, MHVFCU, NY, USA
Reference: Special Reports from "filene" Research Institution