How to reach younger workers? Personalization, choice and education.
A version of this article originally appeared on 401k Specialist.
Younger workers present a clear opportunity to employers. Helping them achieve their financial goals can play a key role in loyalty, trust and recruitment. Many are already engaged with their workplace retirement accounts, and they value employers who support them through times of financial stress.
Data from Schwab Retirement Plan Services on the behaviors and preferences of Gen Z and Millennial workers reveals three ways plan advisors can help employers reach younger workers.
Don't treat them like a crowd
Younger workers have different financial situations than older workers, and not surprisingly, they don't all have the same needs. They want to know their employer recognizes their personal situation, and they want to see this reflected in their retirement plans. Most Gen Z (83%) and Millennial (82%) workers would like personalized advice for their 401(k), and more than 7 in 10 say it's important that their 401(k) investments reflect their personal values.
Like everyone else, Gen Z and Millennials are worried about inflation and stock market volatility getting in the way of their retirement goals, but not as much as older generations. That's not surprising given their longer timelines to retirement. Plan advisors can help employers avoid treating all young workers the same by tailoring benefits and education to the obstacles they believe are most important. Younger workers are more likely to say that unexpected expenses, education costs and supporting family members are obstacles to saving for retirement.
Include a range of investment choices
The 401(k) remains the primary retirement savings vehicle for workers of all generations, although fewer Gen Z (79%) and Millennials (84%) than Gen X (89%) and Boomers (94%) say they are investing in their 401(k)s to save for retirement. Part of the reason may be how Gen Z and Millennial workers got started investing. They are more likely than older generations to say that their first investing experience was a mobile trading application. They are less likely to say it was their 401(k). Just 37% of Gen Z says their first investing experience was through a 401(k) compared to 61% of Gen X and Boomers.
As they see the variety of investment options available through other channels, younger workers are hoping their workplace retirement plans will offer more choices. For example, more than 4 in 10 Gen Z and Millennial workers wish they could invest in annuities through their workplace retirement plan. More than 3 in 10 wish they could select ESG investments and fractional shares.
Plan advisors have an opportunity to help employers accommodate these preferences in a way that works for their plan. It's not common today for plan participants to have access to ESG funds or fractional shares, for example. If it's not practical for a plan sponsor to offer these options directly, a self-directed brokerage account (SDBA) inside the 401(k) is one possible solution that will not upend the core investment menu. An SDBA option allows workers to select more customized investments that satisfy a range of preferences, including personal values or specific financial objectives, such as retirement income.
Offer a variety of learning and advice options
Education also goes a long way to helping workers understand how to address their individual financial situation. For example, nearly half of Gen Z and Millennials want help calculating how much money they need to save for retirement. Other areas younger workers tend to say they have knowledge gaps in include investment advice, determining retirement age and managing their expenses.
Employers have a number of options for addressing these needs, from in-person meetings to self-serve online tools and access to professional financial advice. Plan advisors can help plan sponsors choose options that engage with younger workers based on their preferences and behaviors.
The question or topic may determine the best delivery format. For example, directing participants to an online calculator may be enough to help them determine how much to save for retirement. Gen Z and Millennials are more open to financial wellness tools than older generations, including online tools to help them save for retirement or build an emergency fund.
Live discussions might be more appropriate for understanding the full scope of employees' questions and concerns about managing expenses. Similarly, access to advice might be the right solution for questions about savings strategies and investment selection. About 60% of Gen Z and Millennial employees say they are very likely to follow human advice, and over 40% say the same about computer-generated advice.
Plan advisors play an important role in employers' efforts to attract and retain talent. By helping plan sponsors understand younger workers' saving and investing preferences, they can inform the design of practical, effective strategies to meet the financial needs of a highly mobile talent pool. One in five workers have changed employers in the past 12 months, and 65% of those are Gen Z or Millennials. There is no doubt that employee benefits are top of mind for many young workers as they decide to stay or go.