Data & Research August 23, 2016

Holistic Advice Key to Winning Gen X, Millennial Trust

They are also looking for fiduciary advisers and leading-edge technology.
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To win the business of Generation X and Millennials, registered investment advisers (RIAs) and fee-based advisers need to provide holistic advice and fiduciary support, according to the Jefferson National second annual “Advisor Authority Study.” They are also looking for advice delivered via leading-edge technology.

For advisers who managed $250 million or more, Gen Xers (ages 36 to 52) are their primary target. Advisers who earn $500,000 or more a year say that Millennials (ages 18 to 35) are their primary target.

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With 10,000 Baby Boomers retiring each day over the next 19 years, advisers need to turn their attention to younger investors, Jefferson National says. Only 42% of Gen Xers and 52% of Millennials are working with advisers.

Asked why they work with advisers, 43% of Gen Xers say it is advisers’ years of experience, 37% say it is holistic advice, and 22% say it’s the use of a fee-based fiduciary standard as opposed to a commission-based sales model. Among Millennials, 32% say it is reducing fees, 31% say it is years of experience, 23% say it is socially responsible investing, 20% say it is holistic advice, and 17% say it is a fee-based fiduciary standard.

When advisers were asked how they plan to attract the next generation of investors, 36% say by working with current clients’ family and children, 36% say via social media and 26% say through mobile technology. Jefferson National says this shows a disconnect between what advisers perceive that younger investors want and what they are actually looking for: holistic planning, a fiduciary standard, lowering fees and socially responsible investing.

NEXT: Younger investors’ top financial concerns

While saving for retirement is a priority for investors across all generations, younger investors are focused on other things, as well. For Millennials, the top three financial concerns are financing a large expense, such as a wedding or a vehicle (31%), their children’s education (30%) and retirement (26%). For Gen X investors, it’s retirement (47%), taxes (30%) and their children’s education (22%). Baby Boomers, on the other hand, are completely focused on retirement, with their first priority being managing the cost of health care (40%), followed by protecting assets (35%) and generating reliable income during retirement (30%).

When asked what influences them to work with an adviser, both Millennials and Gen Xers point to enhancements to their websites, robust cyber security and mobile technology. Forty-five percent of Millennials—compared to only 19% of Gen X and 14% of Boomers—think that robo advisers can help manage the volatile market.

Asked how they would like to communicate with their adviser, Millennials first choose face-to-face interaction (22%), followed by email (21%) and phone calls (18%). For Gen X, it’s phone calls (36%), face-to-face (28%) and email (13%). Boomers prefer phone calls and face-to-face (both at 40%), and then email (11%).

“There is a tremendous opportunity shaping the future of financial advice, as an emerging market of younger investors continues to grow in numbers and to build their own wealth,” says Mitchell Caplan, chief executive officer of Jefferson National. “Our research shows how the most successful advisers are more proactive at working to bridge the divide and meet the distinct needs of the next generation.

The report comes on the heels of a Transamerica Center for Retirement Studies survey that found all generations are worried about having enough money in retirement.

Data & Research August 23, 2016

All Generations Are Worried About Retirement

An impressive 72% of Millennials report actively saving for the long term, starting on average at the young age of 22.
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Whether referring to Baby Boomers, Generation X or Millennials, Americans of all ages are worried about having enough money to fund their retirement, according to research by the Transamerica Center for Retirement Studies.

Forty-five percent of Baby Boomers expect their standard of living will decrease in retirement, 83% of Generation X think their generation will have a harder time achieving financial security than their parents, and only 18% of Millennials are very confident about their future retirement.

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Sixty-one percent of workers say they have not fully recovered from the Great Recession, 13% have not started to recover, and 7% think they may never recover. Seventy-seven percent of workers think that Social Security will  not exist when they retire, only 51% of workers think they are building an adequate nest egg, and 65% think they could work until age 65 but still not have enough saved to meet their needs in retirement.

“Today’s workers are grappling with retirement security and are challenged by the wobbly three-legged stool comprising Social Security, employer-sponsored retirement benefits and personal savings,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies. “Amid retirement savings shortfalls, American workers are attempting to prop up our system’s three-legged stool by adding a fourth leg: working during retirement.” The survey found that 38% of workers expect to work during their retirement.

NEXT: Baby Boomers’ outlook

Sixty-six percent of Baby Boomers plan to or are already working past age 65—or don’t expect to ever retire. Eighty-seven percent of Boomers are expecting Social Security to fund some of their retirement needs, and 34% expect it will be their primary source of income. Seventy-eight percent believe retirement accounts or other savings and investments will fund their retirement, but only 34% say they have a traditional pension plan.

The average household savings of all of their retirement accounts is $147,000. Transamerica notes that the average balance may be low because 401(k) plans were introduced when Boomers were already mid-career.

“Baby Boomers are the generation that has rewritten societal rules at every stage of their life,” Collinson says. “Now, Baby Boomer workers are redefining retirement by planning to work until an older age than previous generations. Baby Boomers’ vision can only be achieved if they are proactive about staying employable and if employment opportunities are available to them. As part of their retirement planning, Baby Boomers should create a Plan B if retirement happens unexpectedly due to job loss, health issues or other intervening circumstances.”

Among Generation X, 77% are saving for retirement and started saving at the average age of 28, deferring an average of 7% of their salaries. Unfortunately, 30% have taken a loan or early withdrawal from retirement savings, with commonly cited reasons relating to paying off debt or unplanned major expenses. This may be related to the fact that they have only $5,000 in emergency savings, on average. Their average retirement balance is $69,000, and only 12% are very confident that they will retire with a comfortable lifestyle.

“Generation X entered the workforce in the late 1980s and is the first generation to have access to 401(k) plans for the majority of their working careers,” Collinson says. “As such, they are early adapters who had to learn from their own experience without precedents to help guide their way. Generation X has fallen behind on their retirement savings, but they still have time to catch up and improve their retirement outlook if they begin focusing on it right now.”

Among Millennials, 72% have started saving, on average at the young age of 22. Among those who are offered a 401(k) plan, 72% are contributing to it at an average rate of 7% of their salaries. Thirty percent are saving more than 10%, and their average retirement savings balance is $31,000.

However, 72% say they do not know as much as they should about retirement investing, and 22% say the majority of their savings are in bonds, money market funds, cash or stable value funds. Seventy-five would like more information from their employer about how to achieve their retirement goals, and 80% would like mobile applications for managing their accounts.

“Millennials are the youngest and largest generation in the workforce,” Collinson says. “They’ve heard the word that they need to save for retirement, [and they] are doing a great job saving for retirement.”

The report comes on the heels of a Jefferson National survey of Generation X and Millennials that found when hiring an adviser, they value holistic advice, a fiduciary standard and leading-edge technology.

Transamerica’s full, 94-page report, “Perspectives on Retirement: Baby Boomers, Generation X and Millennials,” can be downloaded here.

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