Commentary: Eighty million millennials are already challenging and redefining so-called convention as their generation becomes a legitimate force in every aspect of our society. Their collective world view often defies the standard notions of prior generations, as they maintain radically different opinions on pretty much everything. They’re also forcing the financial services community to rethink conventional notions surrounding retirement saving — something the industry hasn’t had to do for decades. 

To serve this generation, the financial services community needs to better understand the motivations of the “typical” millennial. First, it’s important to note that most millennials are delaying or rethinking life events. This means, at best, that the language and strategies that have been used in the past will be completely foreign to most of them. At worst, these “tried and true” methods may fly in the face of their closely held values. The pitches and approaches that have worked for decades won’t resonate with most of this generation.

If you distill the essence of “millennial-ness” down to three words, you could define them with community, fulfillment, and technology. They embrace diversity like no previous generation and they rely on peers — some of whom they’ve never met in person — to help them make life decisions. There are several important factors for advisers to consider when working with millennials.

Achievement and fulfillment

Millennials tend to have a work-to-live mentality, which is quite different from the live-to-work mentality that exists in previous generations. They value flexibility over income, and they possess a strong entrepreneurial spirit. Ninety-one percent of millennials surveyed in the recent Multiple Generations @ Work survey indicated that they expect to stay with their current job for less than three years. They’re less concerned with financial achievement than with a sense of fulfillment.

The financial services community needs to educate them on how the two are connected.

Debt will affect their retirement future

Another important fact is that this generation is the most indebted generation ever. This leads to almost one-third of people aged 18-34 living with their parents and has driven the average age of the first time home buyer to 38.

As a result, plan sponsors and financial professionals need to rethink how to help this generation save for retirement. The nuances of the millennial mindset challenge the typical 401(k) strategy. An argument could be made for Roth IRA as a better vehicle to start their retirement saving, because the traditional benefit of employer matching contributions provides less value when you consider that many millennials won’t stay with an organization long enough to become vested in the plan.

Roth doesn’t require a triggering event to get to the contribution dollars and opens virtually infinite avenues on where the money can be invested. When you also add the government requirement to have health care coverage, the picture becomes more complicated for how these younger people need to prioritize their limited resources.

Financial education is key

Another major key to helping millennials invest for their retirement is education. This generation is eager and willing to learn things, but they don’t want to be lectured. Education, service, and support must also be delivered using the latest technology.

Ultimately, the best way to serve millennials and get them saving for retirement is to engage them on their terms. The real battle is seeing millennials for who they’re going to be, not necessarily who they are today; this includes the future leaders of your company, as well as strong financial investors. Just because many millennials have limited means and investable dollars today, it doesn’t mean they should be overlooked. Millennials will earn more in future years and become a larger asset to your company, while increasing their investing. Invest in them, and they’ll eventually invest in you. 

Kevin Boyles is vice president of Ascensus, an independent retirement plan and college savings services provider. He holds the Certified IRA Services Professional (CISP) and Certified IRA Professional (CIP) designations.

 

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