Retirement Industry Can Leverage Young Investor Interest in Guidance

Younger generations are just as interested in receiving advice from a financial adviser as their older counterparts, presenting an opportunity for plan providers to offer reasonably priced in-plan financial advice and planning solutions with young investors in mind, the latest “Cerulli Edge: U.S. Retirement Edition” reported.

“While older investors may have arguably more complex financial situations, younger investors are not without financial stress,” said Elizabeth Chiffer, a retirement analyst at Cerulli Associates in an email response. “Cerulli surveyed 401(k) investors about their top two sources of financial stress. Concerns among Generation Z active 401(k) investors range from not having enough to cover their living expenses to inflation, emergency savings and student loan debt.”

Chiffer says younger investors, who are early in their careers and perhaps have only recently started saving for retirement, may lack the financial knowledge to choose their investments or may not understand their plan’s default investment. While financial wellness programs help address these gaps in knowledge, it can be difficult to drive engagement with these digital-only programs.

“Advice for younger investors could help them avoid making mistakes that could have long-term impacts on their retirement savings,” Chiffer said. “Even if a younger investor is not faced with a ‘tipping point/major life moment’ referenced, like buying a home, for example, they may be susceptible to mistakes that a brief conversation with a professional could help them avoid.”

Among Generation Z plan participants, 68% said they would work with a financial professional before making a change to their finances, and a similar percentage of Baby Boomers, 69%, indicated they would do the same. However, 70% of plan participants with investable assets of less than $100,000, the amount Gen Z participants tend to hold, do not seek out an adviser.

Employers and retirement plan providers should continue to pursue efforts to educate and, when called for, advise participants on their finances, Cerulli recommended. To address the financial challenges most participants face, financial professionals can offer lower-cost solutions, combined with effective communication and employee engagement campaigns.

“The industry has certainly seen new adviser-managed account solutions and an influx of digital advice solutions in recent years,” Chiffer said. “The article references the range of advice solutions that could be made available to retirement investors, including situational advice, call centers, managed account programs, adviser-managed accounts and long-term use of a financial adviser outside the retirement plan. Plan sponsors benefit from having a range of advice solutions to choose from and assessing which solution will best serve the needs of their plan participants.”