Strategic insight into the millennial workforce
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Own Your Tomorrow
Strategic Insight Into The Millennial Workforce
JOHN MANGANARO: Nathan, thank you so much for being here. We have a timely and important conversation to have today. But first, to set context, I think it's important to observe the challenges that PLANSPONSORs face in serving their diverse participant populations. There's the baby boomer generation that faces certain challenges. Generation X that's sometimes referred to as the sandwich generation. And, increasingly, millennials are an important part of a defined contribution plan population.
With that in mind, I think there's a common understanding or belief out there that millennials are perhaps unengaged and even a bit misinformed about their finances. But recent research, I think, has shown that that's not exactly the case. And, in fact, it's really the opposite that is true. Isn't that right?
NATHAN VORIS: That is right. You can't escape an article or a blurb about millennials in the workforce, and the struggles there. Often written not by millennials, I would say. But our research indicates that-- pretty well-informed group of folks.
There's this misconception that they're unengaged, sort of aloof, don't have the right information, aren't taking those things seriously. We just don't find that to be the case with the research that we've seen and that we've done. By and large, if you look at the things that we want somebody to do as retirement plan participants-- rebalance their portfolio, accept advice, those key blocking and tackling events-- we find that millennials, by and large, do those things more often and at a higher rate than the other generations prior to them. So if you look at just those numbers, it would indicate that millennials in that generation are doing things a little better in many ways.
The other thing I would add is that there's still this perception that all millennials are 23 years old. We have investment committees that are led by millennials, and led by folks in their mid 30s. And so they're making very important decisions, have been in retirement plans now for a decade plus, and are doing a great job. And are designing plans that meet the needs of every generation.
JOHN MANGANARO: Right. And with that in mind, what are some of the real and important differences between millennials and previous generations in the workforce?
NATHAN VORIS: You know, we always try to highlight those in those stereotypical ways-- the smartphone, or the tablet. But as I walked through the airport on the way here, everybody does that. Every Gen Xer, many, many baby boomers, and really anybody in the airport that's waiting for their plane is on their tablet, on their smartphone, transacting, researching, listening, consuming media. And so you've got that component.
But I think the big difference is the ability to use that information to make decisions. So very informed type of consumerism. The ability to find an expense ratio in 15 seconds. The ability to compare different solutions that a certain provider may provide versus things that are offered in the retail marketplace. Those kinds of things.
So the ability to make decisions, to seek help and guidance and information, and really be quite an informed consumer for whatever solution or component of retirement they're looking at. And not just retirement but really every facet of life.
JOHN MANGANARO: Speaking to the retirement plan, what are some of the services and offerings that millennials are expecting?
NATHAN VORIS: In many ways, it's really about customization and about personalization. If you think about every aspect of life, very personalized. Your social media accounts, the sites you shop on. Very personalized, based upon the algorithms that drive who they think you are, what you've done that morning or that night, what your prior purchases are.
You can customize your sneakers, and you can have a personal shopper that, based upon your size and your preferences, sends you clothes and takes care of you in that way. So it's a component of everyday life. And that should transcend into their retirement plan and their health plans-- or, really, all their benefits. And so personalized advice and advice-managed counts. The ability to have a one-on-one conversation when wanted, but also the ability to have a digital experience that's tailored to their needs. So really, nothing different than what they would expect in their day-to-day life in any other service that they would interact.
JOHN MANGANARO: Speaking of advice, some might ask whether a target-date fund, say, is the right approach for millennials. Should they be concerned about paying an extra fee for advice?
NATHAN VORIS: Yeah, you know, I think targeted funds certainly have their place. But again, I think it goes to that personalization. Advice works, particularly in that younger audience. If we can get somebody to increase their savings rate at a very early age, or get them in the right portfolio, the right asset allocation, based upon all the information that we know about them, it can be pretty powerful over a 20, 30, 40-year time frame.
And so I've always been a big believer that advice is great for everyone. But it really has an impact in that earlier-- the earlier we can get to somebody and try to get them on the right track, the better.
JOHN MANGANARO: I think it brings up another important question, which is what good will advice do for millennials if they don't engage?
NATHAN VORIS: It's a great question, and we hear that a lot. I'd say two things. One, we have so much data, and much more than we did a decade ago, about an individual. If you think about the record keeping business, we have a lot of information. For any individual, we know their age, their salary, their savings rate, gender, state of residence, account balance. We know the match structure. We know if they're in auto increase or not. So even without engaging, an advice provider can really provide a very personalized tailored portfolio an investment recommendation based upon the data that's already available.
By and large, there's another myth that there are more unengaged participants than we think. If you look at that in our space, we have about 60% of our participants going to the website at least once. They're going to check a balance, do a retirement calculation, those kinds of things. And you add in the phone calls and the chat, and you've got a pretty high percentage of people that every year are doing something, are interacting with Charles Schwab retirement plan services at one point or another.
And so, because someone doesn't take action doesn't necessarily mean they're unengaged. If you have a conversation with a participant that is defaulted into advice or a target-date fund, and you ask them, they know it. They know they've been defaulted at a certain rate. They know they were enrolled in an auto increase. They're aware of those things. They're going to the site, checking balances.
They may not have increased their savings rate or done some of the other things that we'd like them to do, but they do know where they stand. And they know what's happening to them, and happening around them.
JOHN MANGANARO: I think some folks might assume that target-date funds will do just fine for millennials. Should they be concerned about paying an extra fee for advice?
NATHAN VORIS: Important question. Fees are so important. Focus of every fiduciary. But you know, I think about it in a couple of ways. One is the data I mentioned. So the ability to provide a very personalized recommendation with little engagement. And so, as a default participant, being on the right track, that's important. Seeing the value of you know the difference between that allocation from a target-date fund. Being much more personalized and much more focused on that individual.
The second piece is everybody's different. From my experience as a PLANSPONSOR and consultant in prior lives, everybody is a little different. You think about an average retail employer. You might have a pharmacist who's 25 years old, maybe making $165,000 a year, living in a state with no state income taxes. Versus somebody who was working at the cash register or stocking shelves, making $30,000 a year, living in a state with a high state income tax.
And so all of those bits and pieces of information are important. And they create different needs. And so having the ability to know that, and the ability to look at all that data, and make those recommendations, and put somebody in an investment vehicle that's built around those needs, I think, is very important. And I think that personalization adds value.
JOHN MANGANARO: Thank you very much, Nathan. I think that's fantastic information for our readership regarding millennials and the opportunities and challenges they face. Thanks for being here.
NATHAN VORIS: Great, glad to be here.
[End of transcript]
Recently, PlanSponsor's Deputy Editor John Manganaro sat down with Nathan Voris, Managing Director, Schwab Retirement Plan Services, for a conversation about millennials in the workforce.