Magazine

servicing strategies | PLANADVISER July/August 2009

The Young and Restless

How retirement plan advisers can better reach a young, transient workforce

By Ellie Behling editors@assetinternational.com | July/August 2009
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The bad news is that younger participants might be hesitant to save for retirement, but the good news is they are interested in receiving information about it. The retirement plan adviser is a key voice in helping the mobile group of employees often called “Millennials” or “Generation Y” to accumulate for the long term, but it might take creative communication strategies, or even plan design changes, to reach them.

“[Younger workers] pay attention to their money more often because they’ve seen their parents make mistakes,” says financial adviser Jason Chepenik, Managing Partner at Chepenik Financial in Winter Park, Florida. “I have more young people today that actually move their money around inside their 401(k) plan, and are more proactive—or at least ask questions.”

Who Are Gen Yers?

Generational research might be full of simplification and contradiction but, in order to serve the youngest members of the workforce, retirement plan advisers might start with recognizing some broad trends seen from the group. If you ask financial firms—which have an interest in understanding this group, hoping to capture their assets early—they say their research characterizes members of Generation Y (according to the Bureau of Labor Statistics, those born between 1977 and 1995) as conservative, socially responsible, and conscientious investors.

The newest generation in the workforce is the antithesis of the foregone American worker who keeps the same job for decades and retires with a pension. When it comes to their attitude about workplace benefits, Millennials view a benefits package as a large consideration when looking for a job, notes Joanne Sujansky, author of the book Keeping the Millennials: Why Companies Are Losing Billions in Turnover to This Generation—and What To Do about It.

However, despite their appreciation of benefits, Millennials are not afraid to switch jobs or even “jump off the corporate train” and start their own business, Sujansky says. That mobility can pose a challenge for the retirement industry to keep that group steadily accumulating savings.

It might seem incongruous to their skepticism of corporate life, but Millennials also trust authority and welcome paternalistic trends to save for retirement. While they might not stay in jobs for much more than a year, when they are there, research shows they trust their employer, and are interested in having their employer play an active role in benefits and retirement savings.

Prudential Retirement’s research in 2006 found 66% of younger workers viewed automatic enrollment positively. If the employer says it is the right thing to do, younger workers are less likely to challenge the design, which is a good thing for advisers to note when consulting with sponsors about plan design, says Michelle Morey, Vice President, Communication Solutions, at Prudential Retirement.

Combine the aforementioned traits of younger workers—socially aware, risk-averse, and trusting of authority—with the economic environment, and a desire to avoid the market might come naturally, notes Morey. That makes getting out in front of them with the message about the value of long-term saving, while also respecting and buffering their risk-aversion, more important. The good news is, they are more likely to listen than other generations, Morey adds.