The Age of the Virtual Handshake

Lenders must reach out to meet their future millennial clients in their own environment—online

By: Sue Woodard

Millions of words have been written about how different millennials are from their parents, and how the future of mortgage lending is as bleak as the predictions in the old song, “In the Year 2525” by Zager and Evans. From the perspective of the parent of a millennial daughter, rest assured that it just isn’t true: Millennials will prove to be inveterate homeowners, just as generations of Americans have been since the end of World War II.

Their journey to homeownership may follow a different path from their parents’ and grandparents’, but that’s not necessarily a product of their own making. Stuff happens, as Zager and Evans themselves could tell you–their song was No.1 for six weeks in 1969, but they became one-hit wonders, never to be heard from again. Millennials, many feel, were handed great advantages but are appallingly slow to launch out of the nest. While this may appear true, it does little to portend what is yet to come from this generation. You will do very well by catering to this market segment, especially if you pay attention and then adapt and deploy the correct strategies.

Strength in Numbers

If you thought the baby boomers were an important demographic, the millennials will knock your socks off. According to the U.S. Census Bureau, there are 83.1 million of them, born between 1980 and 2000, and they make up more than 25 percent of this country’s population. There were about 75 million baby boomers, and they drove markets almost since they were, well, babies. The millennials, on the other hand, arrived at a time when there was a whole lot more to buy than the boomers’ Davy Crockett caps and 45-RPM rock n’ roll records. (For example, the video game industry easily out-earns the entire movie and TV business, thanks to millennials.)

So they’ve certainly got the headcount to drive markets. But their timing may run a little differently than that of their forebears. The parents of boomers created the housing explosions of the 50s and 60s, moving families out of the cities and into the suburbs. When it came time for boomers to enter the housing market, most bought homes in their late 20s and early 30s. But for millennials, things are much, much different.

Why so different? Millennials’ paradigms for life are fundamentally dissimilar from previous generations. Everything is happening later, from college education to family creation. Some observers feel the reasons for this are based in deep-seated attitudes of self-centricity and entitlement among millennials. While this impression is not without reason, it is overly simplistic. Millennials are demonstrably more idealistic and desire more out of life than what many of them regard as the materialistic pursuits of previous generations.

A study by the Council of Economic Advisors recently found that millennials were more interested than their parents and older siblings in contributing to society, being closer to friends and family, making certain their children are better off, finding new ways to experience things, and smelling the roses instead of being all-consumed by work. This sounds more like idealism than narcissism, and much of it was created by the changing world around them.

Millennials were raised during the worst economic downturn since the 1930s, one that swept the globe with unemployment, foreclosures, rising prices, and political instability. College educations are more expensive than ever, and students are graduating with the highest educational debt in history—currently about $1.1 trillion and rising—and finding fewer well-paying jobs to make it all seem worthwhile. Homeownership scenarios that for prior generations were five to seven years after college graduation have become 10- to 15-year post-graduation timelines for millennials. Rental real estate changed in many areas from being cheaper than purchased housing to being more expensive due to greater demand. We’re waiting longer for this entire generation to be able to qualify for mortgages, and student debts are a big impediment to meeting DTI requirements. That’s a simple reality—but the opportunity is still vibrant.

Instead of heaping criticism upon millennials, as so many seem eager to do, consider a more informed approach. Here are four major things to keep in mind:

Your Future May Depend on Them

While millennials are starting later, they are arriving in greater numbers. More than 10,000 of them are turning 30 every day and will continue to do so for the next two decades. Some estimates say they will spend up to $2 trillion on home purchases over the next five years. That’s an opportunity you want to be listening for when it knocks.

The millennials are a far more diverse group, too. More than 44 percent of them are part of a minority race or ethnic group, and this number spikes depending on locale.

But the driving, unifying factor behind the entire generation is technology. They are the first generation to grow up entirely in the computer and Internet age. They are digital all the way down to the shoes they bought online, with connectivity as basic a necessity as breathing. If you don’t have the connectivity they require, you’re not going to do a lot of business with them.

Connectivity Is Life

Up to 94 percent of millennials begin their home search online, studies say, and most of them prefer to communicate not in person, but through technology. Accenture Consulting put it this way in a recent report: “Millennials stand apart from previous generations due to their immersion in technology. It is a logical extension that they will also conduct their mortgage shopping online. This affords mortgage lenders an opportunity to educate, engage and encourage Millennials, guiding them through the mortgage process.”

This is great advice, and it offers an important theme to dealing successfully with this essential market segment: Technology is everything, and connectivity is life. A revealing stat: 87 percent of millennials surveyed agreed with the statement, “My smartphone never leaves my side, night or day.”

Lenders who can offer the best experiences will derive the greatest benefit, and those experiences are a combination of technology tools and human expertise, delivered in the way the audience desires. Making this work means online, email, text, and mobile capabilities that lenders are just now truly developing–with the help of outside experts. Sales automation and customer relationship management (CRM) technology are the keys to unlocking the opportunity.

Keep in mind that all this technology does not replace the role of the mortgage loan originator (MLO), but actually enhances it. MLOs will largely communicate online and via mobile devices, but they are the ones who will create the borrower experiences in these complicated transactions. Visits will be scheduled, particularly when there is a real estate professional in the equation, and presentations will be made. Most visuals will be done via mobile device screens and less often on paper, but who crafts them? Between the need for compliant messaging and strict disclosure requirements, they are best handled by advanced CRM technology, as are the marketing campaigns. Fortunately, the results are fantastic–colorful, relevant, and powerful, just what MLOs need to gain commitment and improve conversion rates.

Never underestimate the importance of connectivity when dealing with millennials. They will not entirely trust organizations that are less connected than themselves, and as we know, mortgages require that level of trust more than any other transaction.

Sharing Is Caring

Millennials were born into the “sharing economy,” highlighted by new phenomena such as eBay, Amazon, Uber, and Facebook. Experiences are shared as never before, with user ratings an integral part of even the most mundane Web presences. Information is shared instantly and globally, resulting in a market dynamic that is as unprecedented as it is challenging for merchants and service providers. If you can’t play, you won’t stay.

Like most idealists, millennials hope to build a better world through shared information and experiences. They share their experiences online, whether good or bad, for the world to see. They are civic-minded, group-oriented, and understand the power of working together to effect positive change, whether in commerce, society, or personal relationships. Even businesses started by millennials reflect this consciousness, like TOMS, the company that donates a pair of shoes for every one it sells. In their recommendations for catering to millennials, marketing giant MarketingProfs notes that it is essential to deliver value (and not always monetarily); you must build trust with quality products and great service; and you should appeal to the millennial sense of idealism by improving the world, if even in a small way, with every transaction.

With Optimism, Automation, and Mobility, a Bright Future Awaits

In this sharing environment, there is very little room for error. Precision in process and messaging is essential to improve and preserve your brand to deal with this critical segment. Succeeding without the technology needed to stay smart, stay accurate, and stay mobile is, frankly, a difficult prospect. There is readily accessible technology available that can help lenders of all sizes—not just those with big budgets—directly address the millennial market and all others. We know that this tech-savvy crowd is coming, so how can anyone ignore the mandate to be ready with the automation and mobility they demand?

Looking forward to 2016 and beyond, it is not hard to be optimistic for the future of both mortgage lending and the millennial generation, and having a bright, energetic and idealistic millennial daughter helps augment this feeling. The creativity and collaborative spirit of this group is encouraging, determined as they are to make society work better than their parents and grandparents did. They are infused with the conviction that ultimately, by making communication and experiential lessons available globally and transparently, things can’t help but improve on a broad scale.

That’s a future we should look forward to seeing and being a part of.