Christen Marsenison, vice president of corporate strategy and development for Envisage Information Systems, discusses with PLANADVISER why advisers have to start planning for portability—with Baby Boomers moving their money out of the market and Millennials moving their money in.
PA: Christen, there’s a lot happening with technology across the industry today. What changes are you seeing in general that we should be aware of?
CHRISTEN MARSENISON: As a technology company, Envisage is looking for ways to push that leading edge of technology. We’re dealing with a lot of today’s technology using features such as auto-escalate, auto-enroll, and other automated options for plan sponsors to get participants into their plans, but what does tomorrow look like? What do we need to do to get the platforms to move forward, to talk to each other and to move data more efficiently and effectively?
In general, we’re seeing that technology is going from multiple levels of platforms to a singular consolidated platform. Consolidated platforms allow for data to be more readily available to the participants’ plan sponsors, as well as to advisers. Technology has to be ready to support that, to allow advisers to do what they do best, which is advise participants about how to retire.
PA: What role does technology have with financial advisers today, specifically those in the retirement plan industry?
MARSENISON: We see a trend in advisers being able to access that platform data—or in their need to be able to access it more readily. By adjusting the platform basis, they have access to more data to assist their participants. Advisers are going to have to utilize those platforms to give a more realistic view of each participant.
One of the ways that we’re seeing technology change is to more specific areas of technologies. As advisers are specializing their focuses, their lines of business are getting very specific with what they’re dealing with and what type of participant they want to look at: high-net-worth or low-net-worth, or somewhere in the middle. As they are specializing, we believe the technology also has to specialize, and be built on a larger platform that allows them to integrate their specialties with their technology as well.
PA: Are financial advisers using the technology more than ever? Are you seeing a rapid migration or a rapid shift to the use of technology for all plan advisers?
MARSENISON: A movement of advisers currently using new technologies—no. However, we are absolutely seeing a need for new technologies in the adviser space. Envisage has been hosting focus groups and gathering feedback from advisers, and we’re very excited about some new solutions that solve for many of the patterns and problems that advisers in our industry are experiencing.
PA: There’s a lot of talk about the Millennial population today—those 18 to 35 years old. How important is it for financial advisers to focus on and consider them in their business plan today?
MARSENISON: Advisers have to start focusing on Millennials simply for mathematical reasons. Fifteen thousand Baby Boomers are retiring every day—a trend that, over the next 15 to 19 years, will cause a significant decrease in the money within a plan or, first and foremost, within the retirement realm of advisers’ assets under management [AUM].
Secondary to that, Millennials will start driving the market differently. They’ve worked differently, they function differently, and they’ll retire differently. Millennials are going to change jobs far more frequently than the industry is used to with Baby Boomers, who had an average of five careers over a lifetime. We’re looking at up to 15 job changes for Millennials on average, so plans and technology have to start supporting that and allowing for more fluid actions for advisers to advise on different parts of services.
Advisers have to start to plan for Baby Boomers moving their money out of the market and Millennials moving their money in. As Millennials move their money in, advisers have to focus on how to best serve them, and we believe that will come with technology advancements.
PA: This Millennial population seems more tech-savvy than any generation before them. How do you focus on their technological skills?
MARSENISON: I think it’s very important we understand that the Millennial generation is more tech dependent than actually tech savvy—that’s how we look at it. By tech dependent I mean they’re constantly accessing their iPads, their iPhones, their smartphones to make sure they’re constantly in contact with the world around them. Advisers and plan sponsors have to start tapping into that tech dependency to service the Millennials at the level they require. It means taking a more holistic view—a more readily available-, instant-access-type view.
The tech dependency also influences the trust factor. We’ve done a lot of studies as a technology company on Millennials and what they are going to do to move the industry itself forward. One of the things we came up with that was a huge area of differential between Baby Boomers and Millennials is the trust factor.
If you imagine you’re going to New York City for the first time and you want to go out to dinner. If you are a Generation X or Baby Boomer, you go downstairs and you talk to the hotel concierge, you’d tell them you want to go to a nearby Italian place and you don’t want to spend a ton of money, and you don’t want it to be too loud. The concierge would recommend Tony’s down the street. Ask a Millennial how they get dinner recommendations and they’re going to go to yelp.com. They are not going to go talk to the concierge and the reason is very simple: they’d point out that he gets kickbacks from the restaurants he sends guests to.
PA: So that generation, to your point, seems more technologically dependent. But are they retirement ready? Is that what the big conversation really is for this community—trying to teach them the importance of having that retirement savings account?
MARSENISON: You have to reach them where they are. That’s the piece that’s most important, and a Millennial is not retirement ready by any stretch of the imagination. The average time for a Millennial to change jobs is every two to five years. When they change jobs that often, they have very little vesting in their future; they lose out on match contributions, which don’t usually kick in right away. With that said, advisers and plan sponsors need to start focusing on the changing requirements of retirement for that group.
PA: Clearly, financial advisers play a pivotal role in helping Millennials be successful in retirement. How can the plan sponsor, the plan adviser and the participants all work together to ensure this generation builds a successful retirement plan?
MARSENISON: First of all, the plan sponsor and adviser need to take a more holistic view of those participants. Technology can support this by bringing the data together. Millennials will require advisers to look at them as a whole individual, not just as a retirement object—“whole” meaning that we need to understand what Millennial student loan debt looks like. We need to understand what their full benefits package looks like. With medical costs increasing, retirement—and retirement needs—will change. Considering these parts of the whole will help us evaluate that group’s future needs. Technology has the capability to bring all of that together, helping the adviser to best advise those participants for their future.
PA: As we look farther down the road, where do you see technology headed 12, 18 months ahead? Two years out?
MARSENISON: Envisage as a whole—myself included—believes that in the next three to five years, technology will look something like a Financial Life Network©. That network provides instant access to data that helps participants work toward retirement readiness, plan sponsors provide better plans, and allows advisers to do their job in the best way they can.
PA: What does the 401(k) of tomorrow look like five or ten years out?
MARSENISON: As a technology company, we certainly don’t pretend to have the answers to that question, but our research suggests it can be summed up with one word: portability. I believe 401(k) plans will move from being employer-specific to being participant-specific.
The technology has to be there to help facilitate that change, including providing advice to those individual participants, as the plan is more specific to the participant instead of tied to an employer. The adviser becomes even more critical to advise that participant who’s now basically running his own plan. I don’t know if that’s exactly how it goes, but that’s what we’re hearing and seeing.