Retirement plan providers need a new approach—literally—when it comes to engaging millennials: going digital.
According to a blog post from Corporate Insight, millennials use, or seek to use, technology and mobile platforms to manage as many aspects of their lives as possible. But when it comes to retirement plans, many can’t.
While millennials are not only much more likely to value mobile access to their 401(k)s than their parents are, plan providers haven’t been as enthusiastic.
A Corporate Insight survey found that 57 percent of millennials consider the ability to manage their retirement plan account via a mobile app “very important” or “extremely important,” versus just 26 percent of baby boomers, but only 10 of the 19 leading retirement plan providers Corporate Insight tracks offer any kind of transaction capabilities via their iPhone apps.q
And that, considering millennials’ preferences, is a failure.
Although it’s considerably better than it was only four years ago, when only two out of 17 firms provided such service, the post says, “the industry has yet to reach the standard set by other financial industry verticals, like banking and brokerage, where mobile transaction functionality is the new normal.”
It’s true that many retirement plan providers have recently introduced mobile apps, but those apps have only limited capabilities compared with the functionalities millennials are looking for.
Then there’s the little matter of advice and education. Thanks to the Great Recession, millennials have a low risk tolerance and tend to stick to very conservative investments.
In addition, they “highly value advice and are not receiving enough of it,” the post says. With millennials the most likely of all generations to seek some degree of professional advice, at 89 percent compared with 78 percent of boomers, only 58 percent say they have been offered this assistance.
Of course, even among those offered advice, just 59 percent have actually taken advantage of it—possibly because they perceive it as expensive and don’t realize that the plan sponsor may be footing the bill instead of the employee.
Better communicating the menu of options available to employees could correct misperceptions, as well as alert employees unaware of the option to its availability.
Millennials are also more open to managed accounts, and those who have them are likely to say they’re satisfied or very satisfied with them.
Fintech firms offering low-cost robo options could boost the participation of young people in their retirement accounts, and as a means of customization they could be key to improving the results of defined contribution retirement accounts in helping employees prepare for retirement.