According to Statistics South Africa, the median age of South Africans is 28. By starting their financial planning journey early, young South Africans can set themselves up for final security in future – but how does the advice profession cater to these younger potential clients?
When Bidvest Life analysed data from the company’s 2023 Claims Report, an interesting pattern emerged – that life insurance is becoming increasingly crucial for South Africans aged 25-40. Yet, feedback from the company’s top financial advisers revealed younger clients weren’t that interested. “A common perception among younger clients: affordability is a key barrier,” says Nic Smit, Product and Pricing Executive at Bidvest Life. “Many also believe that life insurance is only relevant later in life or once they have families.”
The unfortunate reality is that, if young people don’t see the need for products such as life insurance, they’re unlikely to seek out financial advice at all – and yet, they could derive the greatest benefit from financial advice if they start working with an adviser early.
Meanwhile, advisers need to bring younger clients into their business if the industry is to remain sustainable. “Financial advisers are facing the critical challenge of needing to attract a younger client base, as many have built their businesses on financially established clients who are now facing retirement,” notes Smit.
The Sanlam Benchmark Survey 2023 found that millennials make up about 54% of Sanlam’s Umbrella Fund membership and hold 23% of the assets, while Stats SA data suggests there are 16 million millennials in South Africa.
So, how do advisers connect with younger clients and help them discover the benefits of financial planning?
Understanding the client
As with any client, advisers need to have a good understanding of younger clients, their circumstances, and their needs.
Although not exclusive to South Africa, findings in the Deloitte Global 2024 Gen Z and Millennial Survey provide a useful look into the mindset of younger clients. While respondents were optimistic that their personal financial situations would improve (48% of Gen Zs and 40% of millennials felt this way – possibly underscored by similar optimism around the economy), they also reported feeling insecure about their current financial situations.
Thirty percent of Gen Z respondents and 32% of millennial respondents said they did not feel financially secure, while nearly 60% of Gen Zs and millennials surveyed live pay cheque to pay cheque.
The cost of living was by far the highest concern for both groups. Other concerns included climate change, unemployment, mental health and crime/personal safety.
These findings present both barriers and opportunities for advisers. On the one hand, it’s evident that younger clients need the financial assistance and peace of mind that comes with working with a financial adviser. On the other hand, adding yet another debit order to their already thinly stretched budgets could make them reluctant to invest or take out insurance – a factor that was echoed in Bidvest’s findings.
“Bidvest Life’s 2023 Claims Report highlighted the two most common misconceptions among young people about life insurance: that they do not need it yet, and that it is too expensive,” says Smit. He adds that addressing these beliefs requires making life insurance tangible and relevant to their lives.
“For this demographic, the message should centre on the importance of protecting their most valuable asset: their ability to earn an income,” he says. “The message should be that protecting their income is the most important step a client will take. Even for those who are young and healthy, life is unpredictable – they need a safety net in case of an injury or illness that robs them of the potential to live the life they are planning.”
He says advisers should also stress two critical points:
Affordability: Income protection offers significant value at a cost that fits most budgets, particularly for younger clients.
Cost advantage of starting early: Life insurance is more affordable when taken out at a younger age, allowing clients to lock in lower premiums for the long-term.”
Easing into personal finance
Ronald King, Head: Public Policy & Regulatory Affairs at PSG, believes a good way to encourage younger clients to plan for the future is to ease them into it. Rather than talking to these clients about retirement savings right off the bat, he recommends starting with more immediate goals.
“So, start planning for stuff that they can do in December,” he says. “Plan for savings for a year in the future. Then, when they start experiencing those rewards and realising those rewards were better than their monthly rewards, they suddenly start realising, ‘okay, if I focus a little bit longer, the value of the reward is so much bigger’.”
Once they start experiencing the value, it will be much easier to have conversations around long-term goals, as you’ll be using references they now understand. “You have to start slowly,” says King. “While I really believe that long-term saving is the most important, with a generation that doesn’t believe that, you’re not going to start there, you’re going to start with changing the horizon from a 12-month perspective to a two-year perspective to a five-year perspective.”
Education as the foundation
Most clients require some degree of education – or why would they need a financial adviser? – but with younger clients, education plays an even bigger role in the relationship, as they haven’t spent as many years in the “school of life” yet. This includes both general financial education, as well as product-specific education when putting these in place.
“Clear, upfront education helps prevent confusion and ensures clients are well-prepared should they need to make a claim,” says Smit, noting that it’s important to ensure that younger clients fully understand their policy terms and benefits from the outset.
Waiting periods on income protection policies are a good example. “The waiting period is the number of days a policyholder must be sick or unable to work before their income protection cover will start paying out. For younger clients, who typically face shorter claim durations, selecting the wrong waiting period could leave them unable to claim if they are still within the waiting period, putting them at risk during a critical time. Advisers can guide clients in choosing the waiting period that best aligns with their risk profile and financial circumstances,” Smit explains.
Connecting through life events
Mitch Anthony, a global pioneer in lifestyle financial planning and author of books like Storyselling for Financial Advisors and The Financial Lit Kit (a series of books for teaching children about money), talks about 60 life transitions that people can go through during the course of their lifetimes. These include major transitions, such as marriage, kids, and retirement. But there are several others, many of which tend to happen unexpectedly, like divorce or the illness of a parent, child or spouse.
Having conversations with younger clients about what big life events or transitions may be pertinent to their lives can be a way to meet them where they’re at and bring finance to life for them. While this is by no means an exhaustive list, here are a few to consider:
Financial independence: As people leave their parents’ homes and live independently for the first time, they need to learn about managing their finances – this includes learning to manage their expenses. “A point that I’ve been hammering on for the past two years is that you will not get rich from managing your income,” says King. “You will get rich by managing your expenses. So, if you are telling me you want to be rich and successful, cut your expenses. And if cutting your expenses didn’t hurt you, you didn’t cut deep enough.”
First job: “While death benefits are the traditional starting point when building a life insurance portfolio, income protection should be the basis for every younger client’s portfolio,” says Smit. Bidvest Life’s research shows that a 30-year-old male has a 15% chance of dying before the end of his working career – but a 91% chance of being unable to work for a period of two weeks or more during his working career.”
Having a baby: “According to Bidvest Life’s 2023 Claims Report, childbirth emerged as the leading reason for income protection claims among millennials (aged 29-44),” says Smit.
First car: Short-term investments of two years or less can be used to save a deposit for a car, according to Nedbank.
Engagement: Beyond affording a ring, getting engaged comes with the added cost of a wedding and possibly lobola. According to Nedbank, “Since many South Africans pay lobola when they get married, a wise medium-term investment as soon as a relationship becomes serious might be an account to save towards lobola.”
Looking after elderly parents: “Typically, an adviser would always begin by asking their clients whether they are financially responsible for any dependents. This understanding allows for tailored advice on how best to protect those who rely on them,” says Smit.
Paying off student debt: According to a study published last year in the African Journal of Inter/Multidisciplinary Studies, student loan debt increased from R14 billion in 2019 to R16.5 billion in 2021, causing young people to delay milestones such as starting a family or buying a home.
Physical and mental illness: Cancer ranked in the top three reasons for income protection claims across all age groups in Bidvest Life’s 2023 Claims Report. “Additionally, mental illness was the fourth-most common reason for millennials claiming on their income protection benefits,” says Smit.
Saving for a house: In sharing tips for first-time buyers, Old Mutual notes that, “Besides putting a deposit down, buying a house involves lots of other “hidden” costs too, such as: bond registration costs, property transfer costs, levies and special levies if you’re buying a sectional title property. You should also look at what you’re likely to pay for rates and taxes in addition to your monthly bond repayment.” This is the kind of guidance a financial adviser can provide.
In a recent edition of Insight, Lien Potgieter, Head of Marketing at Medihelp, shared the importance of valuegraphics over traditional demographics. “From worldwide research and Medihelp’s own experience, it is evident that consumers are more motivated and driven by their values today than by demographics and psychographics combined,” she said, adding that, “Values act as a compass, influencing clients’ choices.”
These values may not come to light in a conversation that starts with product recommendations informed by traditional demographics-based wisdom. However, a meaningful conversation with the client, learning about their lifestyle, hopes, ambitions and what matters most to them, can tell you a lot.
Embrace technology
“This generation has grown up with technology and values convenience, speed, and personalisation,” says Smit. Incorporating technology into the advice experience allows advisers to connect with these clients in a way that feels natural to them. And it doesn’t have to involve app development or gamification – it can be as simple as how we choose to communicate.
“While there is no one-size-fits-all solution, few tools are as immediate and engaging as WhatsApp,” says Smit. “Leveraging WhatsApp Business accounts can help financial advisers to connect with clients more effectively, for example by scheduling automated reminders for policy renewal dates, upsell opportunities, and special occasions like birthdays and anniversaries. Preparing personalised messaging in advance not only saves time but also strengthens your client relationships.
“WhatsApp’s ability to share voice notes, images, and videos, as well as text messages provides an excellent opportunity to experiment with formats that encourage interaction and engagement. For instance, short explainer videos or quick voice notes can make complex life insurance concepts more accessible and relatable to younger clients.”
However, if you’re going to use WhatsApp as part of your communication strategy, you need to be true to the nature of the platform in all respects. “Bear in mind that the key to success on WhatsApp is responsiveness,” says Smit. “This platform is centred on real-time communication, so it is essential to reply promptly when clients reach out. By combining the convenience of technology with personal, timely interactions, advisers can position themselves as accessible, trusted partners in their clients’ financial journeys.”
Helping young people secure their future
For Smit, income protection is the most pressing need for younger clients. “Bidvest Life’s 2023 claims statistics show that millennials were 55 times more likely to claim on their income protection benefits than on their death benefits during the year. By comparison, this ratio dropped to 17 times when looking across all age groups. Drilling deeper, millennials accounted for 50% of all income protection claims in 2023 but represented just 12% of death claims. These statistics highlight the critical importance of income protection as the cornerstone of financial security for younger clients, ensuring they are protected against the most likely risk they face during their working years.”
In addition to income protection, he recommends adding critical illness cover. “Adding Critical Illness Income (CI Income) to their income protection benefit ensures that clients are better equipped to deal with the intermittent periods of disability often caused by critical illnesses. Claims on traditional temporary income products are triggered by occupational disability, meaning that they terminate when claimants are deemed fit to return to work.
“For example, cancer patients returning to work between treatment rounds would need to reapply each time, resulting in intermittent payouts that cover only a portion of their income. This often leaves claimants unable to take adequate time off for mental and emotional recovery. Moreover, traditional income protection benefits do not account for additional, unexpected costs, such as dietary changes or frequent travel for treatment. CI income addresses these gaps by guaranteeing uninterrupted monthly payments for up to 12 months following a diagnosis, regardless of whether claimants continue to work during treatment.”
He also recommends younger clients take advantage of the underwriting benefits of securing life cover while they’re still young and healthy. “For clients under 35, incorporating Future Cover Protector into their policies is also worth considering. This feature allows them to add life cover later without undergoing additional medical underwriting, providing flexibility as their financial and family responsibilities evolve,” says Smit.
A final factor to consider when working with younger clients is that some of traditional best practice no longer applies. “Saving 10% of your income for retirement is not going to be enough, and retiring at age 60 is not going to be a possibility. Plus, you can’t retire at age 60 and sit around for 45 years,” notes King. “From a very young age, you need to plan for a second life in a way. And I think a lot of what financial planning is going to change into is being able to assist our clients in retiring from one job and starting something else.”
By meeting younger clients where they’re at and having conversations that feel relevant to their lives and the challenges they’re encountering, advisers can help these clients lay the groundwork to secure their financial futures, so that they don’t have to scramble later on. Meanwhile, advisers can ensure they have a pipeline of steady business to keep their practice sustainable. The majority of younger clients may not have accumulated much in the way of assets, but what they do have is time – they just need to understand how valuable it is.
