Don’t let the word ‘retirement’ put you off financial planning
MILLENNIALS’ eyes glaze over when you mention the word “retirement”, says Viresh Maharaj, the chief executive of client solutions at Sanlam Employee Benefits.
He says if there’s one thing that the financial services industry needs to get right for millennials, it is the preservation of retirement savings when they change jobs.
Drawing on a recent survey of millennials to augment Sanlam’s annual Benchmark Survey of employee benefits, Maharaj says: “Millennials will change jobs more often than any previous generation and are therefore exposed to the temptation of withdrawing their savings more than ever before.”
Exacerbating the problem are five distinct characteristics of millennials, Maharaj says:
1. They do not relate to retirement as a goal;
2. They distrust financial institutions;
3. They are highly confident in their own abilities and highly optimistic about their futures, and are thus hesitant to seek financial advice;
4. They have low levels of financial education and literacy relating to budgeting, managing debt and the impact of compound interest; and
5. They typically have not accumulated sufficient assets to be of interest to financial advisers.
This amounts to a perfect storm when it comes to their longterm savings, Maharaj says. “And they make up almost half of the membership base of South African retirement funds.”
MULTI-PRONGED STRATEGY
Sanlam’s research points to a multi-pronged approach aimed at influencing millennials to make better financial decisions. This involves:
• Using technology as an enabler. “In the context of money, technology is mainly used by millennials to speed up mundane transactional processes. Think efiling, banking and transacting. In our context, technology can be used to transact, communicate and educate,” Maharaj says.
• Retirement benefits counselling, which retirement funds will, by March next year, be required to provide for people changing jobs. “This presents an incredible opportunity to engage millennials proactively at certain trigger events,” Maharaj says.
• Financial literacy programmes that do not undermine millennials’ self-confidence. “Millennials want to be at the centre of their life decisions. They do not want to be told what they can and cannot do. They want insight that empowers them to evaluate what is in their interests.”