Is it too early to start marketing retirement products to Millennials?
Will today’s Millennials pay attention if you try to target them with retirement products and investment advice over the next 12 months?
The answer to both questions is a topic of debate among providers and advisors who deal separately with both retirement products and services, and Millennial investors.
According to Spectrem’s new study Millennial and Generation X Investors: Attracting the Next Generations of Wealth, investor interest in retirement planning correlates to advancing age, and Millennials (those who are currently under the age of 38) don’t yet have a powerful interest in investigating the subject of retirement preparation outside of having a defined contribution account from an employee savings program as a retirement income starting point.
“One of the keys of our Millennial study is to determine what products and services Millennials are tuned into, and which ones they are not yet responding to,’’ said Spectrem president George H. Walper Jr. “It seems obvious that the overwhelming percentage of Millennial investors are not yet tuned into their need to start saving for retirement, even though any advisor will tell you the earlier you begin planning, the better.”
According to the study, among Millennials, only 47 percent say they concern themselves with being able to retire when they want to. That’s slightly lower than the 50 percent of Gen X investors who feel the same way. It is noteworthy that more Millennials have concern over retirement planning than they do about health issues; 42 percent worry about their own health, and 38 percent worry about the health of their spouse.
Affluent Millennials, on average, have 47 percent of their assets as investable assets, with 12 percent in their principal residence, 12 percent in insurance and annuities, and 18 percent in privately held business. But they also have 7 percent of their assets in defined contribution investments (that percentage climbs to 11 percent among Gen X investors who have had more years to contribute to their DC program).
But Millennials are also more liquid in their investable assets, with 25 percent in cash and other easy-to-convert assets (a percentage that drops to 17 percent among Gen X investors).
Does all of this mean it is too early to be marketing retirement products and services to Millennials?
The answer might be a qualified “yes”.
According to Spectrem’s quantitative and qualitative report on retirement, Financial Wellness in Retirement (FWIR), only 44 percent of retired investors started planning for retirement more than five years before retiring. But no advisor would recommend waiting to five years before retiring to begin thinking about the income streams a retired investor will depend on.
The FWIR report does show that modern thought is producing more early interest in retirement planning. Among retirees who have been retired less than 10 years, 47 percent started planning more than five years prior to going into retirement. That relatively high percentage boosted the overall percentage to the 44 percent level.
Many Millennials, however, have parents or even grandparents who are either still working or waiting a long time to retire. Thanks to increased lifespans, stagnant wages and reduced employer contributions to defined contribution plans, many workers are staying in the work force longer. If a Millennial has a parent who has not yet retired, why should the Millennial be thinking about it?
Millennials do want to make some plans about investing. Asked to list the importance of having a formal financial plan, Millennials rated it at 62.45 on a 0-to-100 scale. At the same time, Gen X place the importance of a written financial plan at 63.47, slightly above Millennials.
But the question is whether Millennials want retirement planning to be in their financial plan. If an advisor asks the question and a Millennial says “no, thanks”, the advisor might want to stress the importance of early planning.
But will Millennial investors listen? That is yet another question.
Top Takeaways for Advisors
The problem with young people is that they refuse to consider the possibility that they will get older someday. That’s true of young investors as well. They need to be educated that an early start on retirement funding could make retirement easier to deal with and come allow retirement to come earlier than it might otherwise.
©2017 Spectrem Group