A portrait of American finance in the age of the millennials
According to The Globe and Mail, four drivers of the American financial economy are being eschewed by millennials as they come of age: home ownership, personalized service, debt and the stock market. This development has banks wringing their hands as they struggle to figure out how to change in order to be relevant to millennials.
Generally, millennials are those born between 1982 and 2002. Today they represent the largest slice of the U.S. labor force. Projections have the group’s numbers swelling even more since the youngest of them are on the threshold of adulthood known as adolescence.
Millennials’ three main parents are the Internet, social media and the financial crisis. Due to these three factors, which formed the character of this generation, millennials are believed to be a different kind of consumer.
As businesses change with the times, banks may have a particularly difficult time adapting to millennials because this generation is averse to basic banking services and products. As if that wasn’t enough, some of them blame the banking industry for causing the financial crisis that killed many of their hopes for upward mobility.
In correspondence with The Globe and Mail, Goldman Sachs Analyst Conor Fitzgerald, who reviewed a Goldman Sachs survey examining millennial attitudes toward several mainstream financial services, opines that millennials may have priorities that differ from those of previous generations.
For example, according to the survey, when it comes to choosing a bank, millennials don’t care as much about personalized services, like mobile banking apps, as they do about other factors.
In order of priorities, millennials ranked reputation and values of the bank first, proximity of the bank to work and home second, personal service third and online platform fourth.
725 millennials participated in the Goldman Sachs survey.
Telling from the survey, it looks like banks will need to change how and what they offer for sale to millennials.
For example, if it’s true that millennials are averse to debt how will banks sell their signature product: the loan?
One key question in the survey was what they would do if they suddenly came into a lot of money. 43 percent of participants said they’d pay down debt. Less than 18 percent said they’d use it for a down payment on a home or invest it with the aid of a financial advisor.
Millennials don’t trust the stock market. Only 19 percent of participants would invest in stocks as a way to save for the future. Most of them were either judiciously skeptical or were downright averse to them.
Banks are not going to do much business selling homes to millennials any time soon because few of them aspire to owning one already. Only 29 percent of them are saving for a down payment on a mortgage and 39 percent said home ownership was not a near term goal.
To end, according to Fitzgerald, millennials “hate fees.”
55 percent of participants would switch banks if fees got too high. 42 percent of them said they try to avoid them by any means necessary.
Writing to The Globe and Mail, Mr. Fitzgerald stated, “By 2038, millennials will become the most important financial generation in America, and the industry will have to adapt to meet their needs.”
Will banks do so in time?
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Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.