Boomers to Millennials: Revolution, Not Evolution

What’s in a Generation?

There is much conversation in the Retirement Industry around the Millennial generation. We talk about who Millennials are, how they differ from Boomers and Gen X and what we need to do to pre-pare for them. However, we have not spent as much time identifying when Millennials will begin to impact our industry or what actions we could already be taking.

The reality is, many Millennials are already workforce decision makers. In 2015, already 15% of the workforce works for someone at least 10 years younger than them (source: Career Builder). By 2017, Millennials will represent the largest population segment in the world. By 2020, Millennials will rep-resent 50% of the workforce, and by 2030, 75% of the workforce (source: PwC’s Millennials at Work). There is an immediacy we should feel about Millennials in our industry; the time to just plan has passed, and it is time to act.

But how to best proceed? We know that there are no shortage of generational differences amongst Boomers, Gen X and Millennials, but before diving into the particulars of that data, we need to un-derstand why we must think differently about the Millennial generation—why we cannot just refresh a targeted marketing campaign or update our websites. Millennials will impact the retirement indus-try, but we must be willing to think and work differently so that that we can impact Millennials.We must look at patterns. A Millennial’s life pattern looks markedly different from previous gener-ations’. First, unlike previous generations, Millennials are entering the workforce in their 20’s with an average of $33,000 in student loan debt. Additionally, Millennials are putting off significant life milestones such as marriage and parenthood. In 2012, 23% of Millennials age 18-31 were married and living in their own household, as compared to 56% in 1968 (Source: Pew Research Center, Current Population Survey). Similarly, while in the 2010’s just over 55% of 30 year old women have children, in the 1970’s over 80% of women had children before age 25 (Source: IPUMS-CPS and Goldman Sachs Global Investment Research).

The thought patterns of Millennials as it relates to savings is also important to understand. Millenni-als are not planning for retirement; they do not think about retirement as a life stage. That is not to say, however, that Millennials do not save their money; they do. As of mid-2015, almost one-third of Millennial households owned mutual funds. The median age when Millennials, Gen X and Boomers first purchased mutual funds is 23, 26, and in their 30’s, respectively (Source: Investment Compa-ny Institute). Millennials are saving and investing, but not as a means to retirement so much as an alternative to spending.

Millennials are thinking and living very differently than previous generations about life stages, work and finances. Traditional patterns of messaging and conversation are not going to engage the Mil-lennial generation effectively. To help them, we need to approach servicing the Millennials as a revolution, not an evolution. And we can begin by transforming how we address financial wellness, portability, trust, human experience and speed in retirement.

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Financial Wellness, Portability, Trust, Human Experience & Speed

Millennials regard their finances in a far more holistic way than previous generations; they are the most money conscious and financially savvy generation (Source: Retail Financial Intelligence). They consistently utilize apps and technology that allow them to manage their cash flow. Today, however, it is difficult to service this holistic view, as there is not a singular place to view holistic participant data.

In retirement technology today we can transfer and process entire files between two disparate systems—this is happening in 1:1 exchange channels: advisor to participant, plan sponsor to record keeper, etc. While individual business groups in the retirement industry are tracking the participant information that they need or is required of them, it is not comprehensive, and it is not in a stan-dardized format.

To effectively advance the retirement industry and service Millennial needs, there must be a communi-cation network with a unified backend system that allows for all business groups in the industry to speak to each other—a Financial Life Network®. The banking industry succeeded in doing this; you can slide your debit card into almost any ATM in the world and access your accounts. Establishing an ATM-like system for the retirement industry would mean that a millennial, by retirement, could feasibly have a sin-gular retirement account that has been with them for 40+ years.

The Financial Life Network® is so named, however, because it is inclusive of more than just the re-tirement industry. It includes participant banking, insurance and healthcare information. Including the financial information from these sectors, in addition to retirement, provides a holistic financial picture that would help the retirement industry better service all participant, not just Millennials.

Take healthcare, for example. As Millennials age, retirement payments are, and are going to be, increasingly dependent upon healthcare costs. Minus non-contributors, the greatest single point of deficit in the retirement industry is medical costs. A connected Financial Life Network® could allow a Millennial to see, in a single place and with a single log in, their student loan balances, retirement accounts, bank accounts, credit cards and, most importantly, understand the interplay between all of these accounts.

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A connected Financial Life Network® would service a Millennial generation that demands portabili-ty. Portability to some is the ability to see data on a mobile device. Portability to others may be the ability to have a retirement account move with the participant as opposed to being tied to an em-ployer. Either way, Millennials want data instantly when they ask for it; the retirement industry is not ready to provide that.

We as an industry have to begin to utilize technology to push data as opposed to pulling data. We could begin pushing data by enabling account access via other portals and to outside tools. What if we could push a text to Millennials advising them that and extra five dollars in their retirement account would be worth “X” in the long run?

We also need to consider the sheer practicality of portability for Millennials. If the pattern among Millennials continues to be changing jobs every few years, a Millennial contributing to each em-ployer sponsored 401(k) is going to struggle to holistically monitor each account. Advising a Millen-nial with that volume of retirement accounts is going to be daunting for Advisors, as well. If we can create common standards across our competitor set so that sharing information is easier, we will absolutely be better prepared to service and engage Millennials.

Ready access to data anywhere and anytime speaks to another Millennial generation hallmark—lack of trust. 40% of Boomers believe that inherently most people can be trusted. Only 19% of Millennials feel the same way (Source: Pew Research). The Millennial generation does not simply trust someone because they are deemed an expert. They want to see the data themselves; they want to do research themselves.

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Accepting that Millennials trust differently, there are other changes to how our industry does busi-ness that could happen. Millennials want independent verification of expertise from a network they value. Millennials are using Yelp.com instead of a concierge, TripAdvisor instead of a travel agency and Amazon product reviews instead of a salesperson. What if choosing a Financial Advisor involved the same process? It would not be a bad thing, just different. Independent verification is incredibly important to Millennials, and understanding and appealing to that Millennial value could be a bene-ficial tool to engage Millennials.

While data and independent research is certainly important, the retirement industry cannot forget that the human experience is still something Millennials want. 41% of Millennials would prefer to communicate electronically, as opposed to the face-to-face or over the telephone (Source: PwC Re-search). This leaves half of Millennials still preferring face-to-face or phone conversation.So while Millennials certainly utilize technology far more than any generation before them, there is a specific need for appropriately timed human interaction. Today we mostly talk about enhancing the digital experience; what is the frequency of interaction with your participant website or how do we drive more Participants to the website?

However it is utilization of technology to generate communication with Millennials that is essential. Timing the human interaction to support the electronic communication is critical. We need to bethinking about how to integrate the human experience with the digital so that it is seamless, so that no information has to be repeated.

Imagine that our industry could do the following. A Millennial, let’s call him “Jerry” is looking at his phone and receives a text, “Do you have $5? If yes click here.” Jerry is taken through his phone to a place where he can allocate that $5 across a few funds. Jerry may make his selections himself. Or, perhaps Jerry wants to instant message him and provide advice like, “Hi Jerry, I think you should put $2 in fund X and $3 in fund Y, if you agree click here. Or perhaps this communication has prompted Jerry to schedule a meeting to speak with his Advisor in person for advice. Either way, Jerry now has $5 invested in his future.

The above scenario utilizes technology but allows for the participant to have human interaction on-demand and on their terms—exactly what Millennials want.

Jerry’s investing scenario also highlights another generational difference amongst Millennials—a need for speed. As a generation that grew up googling their questions and receiving instant answers, it is not surprising that Millennials are all about instant gratification. In fact, Millennials value speed more than they value service; this is the reverse of the current customer service model (Source: Boston Consulting Group, The Millennial Consumer). To meet the expectations of a generation that is always in a hurry, the retirement industry must change and service millennials on their terms with the fast, concise and specific answers they need.

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What Can We Do? Think Outside the Box

When thinking about solutions to help Millennials retire, we have to inspire retirement organizations to think outside of the box. There are likely already structures and groups inside our organizations that can help to do that. For example, we could poll employee resource groups (ERGs) differently.

ERGs are fast becoming the mecha-nism by which companies commu-nicate across demographics. Most large organizations and each day more medium and small organizations are establishing and utiliz-ing ERGs—many have an ERG dedicated to supporting Millennials. Meeting with these ERGs is a great way to hold an internal focus group and get instant insight into the thought patterns and preferenc-es of Millennials. For example, we know that five out of six Millennials connect with brands on social media, but determining what our organizations should share to be impactful is a difficult question to answer. Talking to a Millennial ERG about what desired outcomes of corporate social media use could be very insightful.

Similarly, we can look to our Human Resource departments. HR departments have been focusing for some time on attracting and retaining Millennial talent. They too, could provide strategic insights into what has been successful in their relationship building with Millennials.

Think even further outside the box and combine the two. Statistics show that 401(k) enrollment at the time of hire occurs at a higher rate and participation level than trying to enroll participants post-hire. Could Millennial ERGs partner with Human Resources as peer Influencers to explain re-tirement?

The retirement industry can also look to the retail industry and how they attract Millennials. Retail organizations are far ahead of financial service—and most all other industries—when it comes to impacting the Millennial generation. Companies that have a retail sales group or even companies with colleagues in retail can talk to them about what attracts Millennial buyers and what motivates Millennials to open their wallets. Even sites like YouTube are a wealth of information, where we can explore what retail organizations are doing to change their communications with Millennials.

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Beyond marketing, retail organizations are a great place to explore customer service tailored to Millennials. For example, Amazon is lauded for their brand loyalty amongst Millennials. If we explore Amazon.com, what reviews, customer service support, auto-filled forms and other features and re-tirement companies replicate, alter or utilize to better service Millennials?

That type of research could help the retirement industry build effective journey maps for Millenni-als. Journey mapping is a customer service strategy that is gaining momentum, as data alone often fails to communicate the frustrations and experiences of customers. Custom journey maps tell the story of the customer’s experience from initial contact, through process of engagement and into long term relationships. Journey maps often succeed where data points fail, in that they provide a greater sense of the customer’s motivation—what does the customer want to achieve, and how do they expect the organization to help them.

Another pitfall of journey mapping is relying only on hard data. It is important to gather anecdotal research from Millennials themselves. Not only will this create a sharper, clearer map, but engaging Millennials for feedback offers them a vested interest in journeying through the organizations entire map.

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Servicing Millennials is Not and Evolution; It’s a Revolution

Millennials are already changing the way we work; they are going to change the way we retire. We must accept that Millennials are different and shift the conversation from “Why won’t you do what I want you to do,” to “What would make you want to…” The way the retirement industry thinks today must change for tomorrow or our industry will not only be hampered by resource constraints, but by the inability to think outside of the box and innovate.

We cannot wait to act, because change takes time. The first ATM machine was patented in 1960, and it took until 1977 for Citibank to invest in $100 million dollars’ worth of ATM’s in New York City. If the retirement industry, seeking the same level of transformation, begins to work towards a holistic Fi-nancial Life Network® now, we could be a revolutionized industry just as Millennials are taking over 75% of the workforce.

But we can start small. If we think laterally and act now in creative ways to inspire Millennials, we can help this generation achieve retirement success. Innovators don’t have to rule the market; they just need to change it enough so that others are forced to follow suit.

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