Traditional financial advice has been based on a uniform approach for a relatively uniform workforce. Over the years, there has been a shift in the average workforce age, with the so-called Generation Xers (born mid- 1960s to 1965 to early 1980s) and Generation Ys (the millennials) now making up the majority of employees. The millennial percentage of the workforce composition has jumped from 39% to 52%. Those born after 1996 – the Generation Z workers – are expected to make up 24% by next year.
New workforce, new needs
Younger people’s life events no longer happen in the same linear way as they did for previous generations. Single-parent households, particularly headed by women, far outweigh those where both parents live together. Taking care of parents and extended family, the average employee now has twice the number of dependants compared to five years ago.
For various reasons, millennials change jobs every two to three years. When they do this, they frequently cash out their retirement savings, doing so more than once during their working careers. They see retirement as a distant future, and believe that they will have accumulated sufficient money to retire comfortably when they reach retirement age.
Sadly, death statistics are now higher for younger people. Group insurance data shows that the proportion of unnatural or accident-related deaths is increasing. Critical illness statistics are also increasing. The claims statistics indicate that overall cancer claims have increased by 48% since 2012, representing 15% of all disability benefit claims in 2018. Some 21% of the claims were paid to employees below the age of 40.
This should tell us that we need to understand who these employees are, what their lives look like and what their real needs are. Corporate financial advisers must start considering the new workforce’s real needs at each major life event that influences their financial journey.
• They lack financial literacy. They are financially vulnerable and don’t understand the retirement benefits they have or the terminology around retirement benefits;
• They engage differently. They are bombarded with competing information from all sides. If
communication is not specific to their needs — when, where and how they want to receive it — they don’t engage at all. They want direct information that is easy to understand;
• They see retirement differently. It isn’t uncommon among the younger generations of employees to have at least one income-generating side hustle to sustain a desired lifestyle. They don’t think about retirement because they don’t think they will ever have sufficient funds to retire. They resolve to commit to longer-term plans, hoping that these multiple income streams will sustain them into retirement, or they rely on family.
Employee benefits unchanged
Even though the composition of the workforce has changed, employers and retirement funds are still offering the same major benefits that they have previously provided.
The reason is possibly straightforward. The employer’s employee benefits decision-makers are generally much older and earn a much higher salaries than the average lower-income, younger employee. They may simply be out of touch with the real needs of the workforce.
To provide the employee-benefits requirements of a changed workforce, companies now need corporate financial advisers and fund consultants who understand this. They need advisory solutions and employee benefits with a fresh, new approach.
For example, consider the mentioned increase in the rate of unnatural, accident-related deaths among younger employees. This represents a gap in the benefits traditionally provided, and one that should be looked at differently going forward.
Use of technology
Even though information is available at members’ fingertips through technology, this doesn’t mean they necessarily understand the information. Neither does it give them the knowledge they need to make decisions that will put them on a sustainable path of providing for retirement.
Fund members are real people with individual, unique needs. But most technology, devoid of human interaction, tends to apply a one-size-fits-all or, at best, a broad segmentation model to offer financial solutions. Yet, to address the needs of the new generation of employees, it must be coupled with human advice.
The world keeps changing So too have the employeebenefits needs of the new workforce. Taking care of members’ needs before and after retirement now requires a fresh approach to advice, technology and solutions. Traditional fund consultants or corporate financial advisers no longer serve this changed environment.
Solving the real needs of the new generation of employees cannot be accomplished with hi-tech solutions alone. Artificial intelligence solutions cater for averages, not for unique needs. What will be pioneering is how technology is used to provide for real, individual needs. For trustees to offer solutions to the real, individual retirement needs of their members, human advice must form part of the equation.
To provide the needs of the new workforce, it is imperative that the insights gained through technology are interpreted by an expert team of unbiased, trusted consultants.
Using technology, semi-personal individual advice is possible and it is scalable. Innovative fund analytics tools not only help employees to better articulate their needs. They also provide valuable data on member behaviour. Individual data offers insights that allow for advice on how to adapt individual member behaviour to set them on the path of providing successfully for retirement.
Smart advice should be holistic. It should consider current trends and the changing characteristics and behaviour of the workforce, and it should be matched with tailor-made solutions. Members must be able to engage effortlessly around their benefits — on a personal level and in real time – either by SMS or e-mail, or through the web. Member engagement means member insight, and member insight means positively changed behaviour.
Technology and information are only valuable if the data is harnessed to make a real difference where it matters. If the data and results are carefully analysed by a team of expert actuaries and consultants, market-leading analytics and reporting can help employers make better decisions for their employees.