Participants September 25, 2017

Founder of TheMuse Offers Inside Take on Millennials’ Work Preferences

Data suggests that Millennials will make up 75% of the workforce by the year 2025.

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Kathryn Minshew is the CEO and founder of TheMuse.com, which she describes as a “career networking platform used by over 50 million Millennials and hundreds of employers to help individuals navigate their working lives.”

The real value of TheMuse, Minshew suggests, is found in the rich and more or less unique dataset the firm has been able to collect with the permission of its users, covering many Millennials but also individuals from Generation X and the Baby Boomers. More and more, Minshew has been asked to share this comparative data (and her own personal insight) with retirement plan providers and employee benefits industry stakeholders, as she did at a recent Wells Fargo Asset Management press discussion in New York.

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“Our data suggests that Millennials will make up 75% of the workforce by the year 2025,” she told a group of financial trade industry reporters. “This is a really important statistic because we all know that Millennials have different goals and preferences than older generations, speaking broadly, when it comes to work. For example only 10% of Millennials who are currently looking for a new job with us say they are doing so for the purpose of finding higher paying work.”

The vast majority of Millennials instead tell TheMuse they are looking for work that will make them happier or give their life more meaning.

This may seem like data that is more relevant for other human resources and benefits discussions outside the retirement plan—say, for the decision about whether an employer should offer flexible working hours or the opportunity to work remotely. But based on Wells Fargo data and on her own firm’s analysis, Minshew suggested Millennials stand to inherit some $30 trillion in wealth over the coming decades, “and this has very important implications for their financial futures, including the workplace retirement planning picture.”

Responding to a question from PLANSPONSOR, Minshew agreed that Millennials, and for that matter the older generations, are “often over-generalized into one group.”

“There are nuances that require careful consideration,” Minshew said. “But there are also common themes that are borne out clearly by the data and which have a real impact in the marketplace today. Millennials widely report an admirable eagerness to invest in ways that benefit the greater good. And a fair number also reveal that they are not yet financially independent—which obviously represents a hurdle in their altruistic pursuits.”

According to data from Wells Fargo and TheMuse, if given $1,000 to invest, 86% of Millennials would be motivated to invest in a company that “makes the world a better place with their products.” At the same time, 74% also agree it “would be easier to stomach the ups and downs of investing if the investments had a positive impact on the world.”

There is also near-unanimous agreement among Millennials that “success at work is more about happiness than material prosperity.” Related to this, 77% of employed Millennials say they are happy to go to work every day.

Minshew suggested another important fact to consider is that 44% of Millennials say they have turned down a job offer with equal or better pay because of a “disconnect with the organizational culture of the prospective employer.”

“We see from our discussions with employers that there can be a premium of up to 20% on hiring costs and time taken to successfully fill a position when you have not established a process that sends a clear and consistent signal to prospective employees about the company’s culture and its treatment of its valued employees,” she concluded. “Employers must be willing to adopt creative tactics to understand the preferences of the work force of the future.”   

Data and Research September 25, 2017

Sponsors More Focused on Their Fiduciary Responsibilities

The uncertainty over the fiduciary rule and increased participant litigation are prompting sponsors to move to lower-cost investment options.

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Due to regulatory uncertainty and increasing litigation from plan participants, retirement plan sponsors have become more proactive about their fiduciary responsibilities, Deloitte found in its Annual Defined Contribution Benchmarking Survey, based on a survey of 240 sponsors. Sponsors are seeking out lower-cost investment options, moving from revenue-sharing to direct fees and simplifying their investment lineup.

More than one-third, 35%, of sponsors are conducting retirement readiness assessments that look at what percentage of a participant’s final income is on track to be replaced in retirement. This is up considerably from a mere 12% in 2013. Sixty-six percent of sponsors want providers to enhance their websites and tools to help them determine where they should concentrate their education efforts.

Sixty-five percent of sponsors target their communications messages based on demographics, while 54% use activity-based and 45% use behavior-based communications. As to what they are trying to achieve with these communications, 74% of sponsors said it is to encourage participants to increase their savings rates or opt into automatic escalation. Fifty-four percent said it is to provide investment education and to encourage participants to use recordkeeper tools. Sixty-five percent of sponsors use some form of an automatic solution, be it auto enrollment, escalation or managed accounts.

Ninety-three percent of sponsors offer either a company match or a profit-sharing contribution. Fifty-four percent do a true-up of their match at the end of the year for employees who reach the maximum compensation limit or who hit the 401(k) limit before receiving the maximum possible match, up from 45% in 2015.

Asked why their employees participate in their retirement plan, 41% of sponsors said it is to take advantage of the company match, and 31% said it is to save for retirement. Sixty-two percent of sponsors said their retirement plan helps them retain employees, and 74% said it is an effective recruiting tool. Asked why employees do not participate in their plan, 28% said it is due to a lack of awareness or understanding, and 7% said it is because of the uncertain economy and job market.

“As contribution and investment decisions move from the hands of finance departments to individual participants, the expertise of plan sponsors has shifted from a financial management role to a keen attention to their fiduciary oversight role,” says Stacy Sandler, a principal with Deloitte Consulting. “By acting in the best interest of plan participants, plan sponsors are offering holistic tactics to support participant financial wellness and focusing on simplifying the plan offerings. A critical component of that is making sure sponsors better educate employees on options and help them to fully utilize the financial tools and resources available to them.”

Deloitte’s full report can be downloaded here.

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