After years of debate, lobbying, stops and starts, the U.S. government is now on the verge of allowing certain required retirement communications to be delivered digitally, if clients opt in. The verge could mean we’re months away or years. Nobody knows for sure. Meanwhile, the rest of the consumer economy has long ago embraced digital communications and transactions. Retirement providers who have not already built a robust digital experience for users should not wait around for the government before they catch up. This is a chance to build a lifetime client relationship.
For most investors, a retirement plan such as a 401(k) or 403(b) represents the largest investment outside of home real estate. The digital experience can change how these individuals communicate with both their plan sponsors and their investment providers. It’s an opportunity for investor education, and for investment companies to build relationships with savers that will endure career changes, shifting needs and annuitization of assets upon retirement.
Successful implementation of digital communications offers the investment management industry a crucial opportunity to improve relationships with all 83 million retirement participants, especially millennial investors who pay little attention to paper delivery and want ongoing, targeted digital communications. millennials will be 75 percent of the U.S. workforce by 2030.
Creating A Digital Client Experience
Retirement providers should look beyond the obvious when creating and tailoring digital communications. While it might be tempting to craft an email with a link to a password protected PDF version of a paper statement, this approach would be a missed relationship-building opportunity.
The average millennial investor turned 30 in 2018 while older members of that generation are now in their early forties and beginning to think seriously about retirement two to three decades down the road. A 2018 study of millennial investors conducted by Broadridge and the Center for Generational Kinetics underscores the fact that millennials stand to inherit as much as $30 trillion in assets. Meanwhile, 70 percent of millennials have no relationship to a financial advisor. Outside of workplace retirement plans, they vastly prefer to park their wealth in safe but low yielding savings accounts.
For many of these investors, their workplace retirement plan is their only point of contact with the investment management industry. Only 8 percent of millennials use a non-workplace, tax advantaged savings plan such as a traditional or Roth IRA.
Through electronic communications, investment management companies can create interactive, mobile-responsive, HTML-driven experiences for plan participants that can guide them through account set-up, contribution management, investment elections and rollovers after career changes.
Retirement providers will be able to deliver useful services and earn loyalty that could turn a workplace retirement saver into an IRA, advisory or annuity client down the road.
While only a third of millennials currently have a financial advisor, these younger investors would be more willing to invest outside of their retirement accounts if they had access to professional guidance. Digital delivery of retirement plan information could be the first step in a process of ongoing nudges that will encourage savings and investment for the millennial generation.