Data & Research December 28, 2016

Evident Generational Shift in Advice Providers and Recipients

The oldest segment of respondents is likelier to say they don’t make enough money to worry about financial planning.
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Findings from the 8th annual New Year’s Resolution Survey by Allianz Life show younger respondents are more likely than older respondents to consult a financial planner in 2017.

The research offers evidence of an ongoing generational shift in the advisory client base, with many Millennials and Gen Xers proactively seeking financial advice for the first time. Other findings suggest providers will do well to bring younger professionals into client-facing roles, sooner rather than later.

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Across all age grounds, the survey finds 29% say they are more likely to seek help from a financial professional in 2017, while for those age 18 to 34 the figure is 45%. Among the 35 to 54 age segment, it’s 27%, while just 17% of those older than 55 say the same.

Perhaps a surprise, the oldest segment is likelier to say they don’t make enough money to worry about financial planning, at 33%, whereas 26% in the 18 to 34 range say the same. Thirty percent of the middle age group feels this way.  

Overall, the median age group is the most optimistic that their personal financial picture will improve in the near future, though just 37% agree with this sentiment. For those younger than 34, it’s 28%, and for those older than 55, it’s 31%.

The data shows men are somewhat more likely to plan to seek advice in 2017 (38%) compared with women (28%).

“Women are more likely than men to report not making enough money as a reason to not have financial planning as a resolution,” researchers observe. “Men are more likely than women to report already having a solid financial plan and the complexity of financial planning as the reasons to not have financial planning as a resolution.”

In Practice December 28, 2016

What's Next for Robo-Advice in the DC Space?

Robo-advisers gained some traction in the DC industry this year, and many have come to see how the technology could work with, rather than against, traditional advisers.
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Robo-advisers rolled into the financial services industry initially targeting individual investors, but in recent years automated advice pushed deeper into the retirement planning space with the release of a wide variety of products and services. 

A number of integrated 401(k) platforms emerged during 2016, offering personalized investment advice for large and small groups of participants; they provide plan sponsors with streamlined administration and fiduciary support. Some operate as independent platforms while others can be layered with other services. Either way, experts increasingly argue that automated investment technology can help retirement advisers and asset management firms better serve their clients.

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During a Plan Adviser National Conference (PANC) panel on robo-advice, Jeffrey Hemker, national sales manager in the retirement division at Invesco, argued that advisers stand to gain from incorporating the best parts of “robo” into their business. His firm recently adopted services from robo-adviser Jemstep, which previously served only as an automated investment platform before offering its software.  

A number of firms including Vanguard, Charles Schwab, and Fidelity have rolled out their own offerings, which combine robo-advice with the human touch. This approach to asset management may help overcome some of the challenges robo-advice critics said would prevent the technology from making a sizable impact on the retirement industry. A human adviser can call a client when the market crashes; human advisers can also help with some of the specific aspects of retirement planning that may now be too complex for algorithms, perhaps Social Security claiming strategies or managing health care costs in retirement.

Retirement plan participants can also take advantage of what affluent investors already find interesting about robo-advisers. According to research and focus group studies by Hearts& Wallets, consumers generally value key benefits from robo-advice including user-friendly interfaces, responsive design, and fee transparency.

Most robo-advisers, however, still manage rollovers into automated individual retirement accounts (IRAs) rather than assets in a 401(k). But this may change with advances in technology, changes in regulation, the growth of automated retirement plans, and an industry shift to passive investing.

Robo-advisers may face challenges as fiduciaries especially in light of the impending Department of Labor conflict of interest rule. Some industry experts, however, argue that robo-advisers can function perfectly well as fiduciaries under current Securities and Exchange Commission (SEC) rules, and even present fewer potential conflicts of interests based on their design. 

Ultimately, the key for plan sponsors and their advisers is to leverage this technology as they best see fit for their unique participants using the resources at hand.

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