Why the future of retirement savings is digital
Looking to boost retirement assets? Digital capability — and millennials — may be the key.
“Older consumers have more money, but millennials have a larger share of the available market, and are more willing to move,” said Bob Hedges, partner at A.T. Kearney the management consulting firm, speaking at SourceMedia’s InVest conference in New York. “And they respond to an adviser’s digital capabilities.”
According to A.T. Kearney’s newly released 2017 Future of Advice study, millennials age 18 to 34 have $1.5 trillion in total retirement assets — only a fraction of the $22.5 trillion in retirement assets held by consumers 35 and older.
But while only 6% of older consumers are willing to move their retirement accounts to a different adviser, 32% of millennials are open to switching. That translates into an available market of approximately $500 billion.
“If you’re in the business of getting new business, this is a market you can’t ignore,” Hedges said. “The best digital experience will increasingly drive who gets share in the retirement space.”
RETIREMENT PRIORITY FOR MILLENNIALS
Perhaps surprisingly, the A.T. Kearney study found that millennials said saving for retirement was their main financial priority, placing it above managing day-to-day expenses, getting out of debt and saving for an event such as a wedding.
Critically for advisers, millennials are willing to move their retirement savings, and “their business is available,” said Monica Gabel, an A.T. Kearney partner. “Advisers need to leverage their technology to reach them.”
Specifically, the report urged advisers to have a mobile account opening capability and a mobile 401(k) rollover process.
‘WILLING TO SWITCH’
Low cost and transparent fees were also important to younger consumers, the study found.
Younger consumers age 18 to 34 were highly price sensitive and “overwhelmingly willing to switch providers for lower fees,” according to the report. They were also more open than older consumers to receiving investment advice from digital firms like Betterment or Wealthfront and were “willing to use robo advisory services to manage their household assets,” the report said.
And while older consumers rely more heavily on dedicated advisers and preferred to receive advice from traditional investment firms, the study found that millennials were more independent when making financial decisions and more open to nontraditional investment advice providers.
The study also found that millennials would rather do business with traditional banks than with investment firms.