Gen XY Financial Maturity: The Power of Guarantees

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1 Gen XY Financial Maturity: The Power of Guarantees A Multi-Sponsor Opportunity May 2015 Greenwald & Associates

2 2015 Gen XY Financial Maturity Study Introduction Members of Generations X and Y are trying to save for retirement. It continues to be among their top financial goals. However, likely because of the Great Recession, many younger consumers are (and may remain) risk averse. Last year, one in four said that they prefer to take little or no investment risk, while only one in ten were willing to take considerable risk. Many agreed that they were reluctant to invest in the stock market due to recent volatility. Yet, fixed investments in a low interest rate environment are not producing the returns that these consumers want or need. They may be seeking alternatives that can help them balance safety and risk and this could make a variety of financial products with guarantees and protections very appealing. In 2014, four out of five suggested that protecting their assets from market loss was an important reason to buy a financial product. Additionally, these young consumers aren t just focused on making it to retirement. This body of research, conducted over the past five years, also shows that young consumers are already thinking about income in retirement and find lifetime income guarantees appealing, even at a young age. Take these findings, for example: 8 in 10 indicate interest in a product that provides a regular stream of income in retirement. Nearly 3 in 4 show receptivity to creating their own personal pension for retirement. 6 in 10 say they hope to buy or invest in a product that helps them turn their savings into a regular stream of income for life. The oldest Gen Xers turn 50 in 2015, and since many plan to retire at 65, that leaves them only 15 years to save and plan for retirement. As Gen Xers (and Gen Yers) look to save for retirement, they may find products with downside protection appealing, and a lifetime income guarantee may be a welcome enhancement. In this year s study, we aim to explore the types of guarantees and protections Generation X and Y consumers may find attractive. 2

3 2015 Gen XY Financial Maturity Study Why Sponsor? Sponsors will gain a better understanding of young consumers risk tolerance and how they have been impacted by the Great Recession. We will explore their desire for products that offer a variety of guarantees and protections to see if these increase interest in greater savings and market participation. We ll also explore their interest in new asset allocations and messages about investing and investment risk. The research will: Inform Gen XY marketing plans by identifying messages that resonate with younger consumers by demonstrating an understanding of their concerns Guide product and service development targeted to this age group. Tweak product designs to offer the features young consumers want Develop better tools to gauge risk tolerance and make appropriate recommendations that balance growth and safety Help sponsors rethink product naming, positioning and messaging Create more effective communications to encourage savings in and out of the workplace WHO SHOULD SPONSOR Retirement solutions providers Plan providers Life insurers Investment companies Providers of financial education & advice Sponsors can use the study s findings to educate employers & advisors about the need for targeted education and communication, generate social media discussion, and inform their own product development & research efforts. All external use of the study must be discussed with Greenwald & Associates in advance and cited as Greenwald & Associates Gen XY Financial Maturity Study. 3

4 2015 Gen XY Financial Maturity Study How it works Greenwald & Associates will conduct an online survey of 2,000 consumers age 21 to 50, representing both Generation X (born ) and Generation Y (born , by our definition). Respondents will be screened to ensure they have at least a high school education and a household income of at least $25,000 if single and $50,000 if married. With sponsor input, Greenwald & Associates will develop a 20-minute questionnaire for this project and will manage all fielding, analysis and reporting. Sponsors will provide input on the direction of the questionnaire and concepts to be tested in kick-off calls with the Greenwald team. They may also provide feedback on questionnaire drafts. Greenwald s research team will synthesize sponsor feedback and will make all final decisions about the questionnaire. For cost and planning purposes, we assume the questionnaire will include no more than three open-ended questions, the results of which will be coded. Deliverables will include: An annotated questionnaire showing overall results among the total sample A PowerPoint report of the most interesting & actionable survey findings, highlighting generational differences and other meaningful sub-group differences One all-sponsor data tabulation book that covers basic demographics of survey respondents One custom data tabulation book, allowing sponsors to specify the age and income breaks they prefer, and include crosstabs on items of interest Participation in an all-sponsor webinar to present the study s findings 4

5 What we can cover The power of guarantees You set the tone. All sponsors are encouraged to provide ideas and concepts for testing, as well as other attitudes & behaviors they would like to explore. What are Gen XY s current financial behaviors & attitudes? Long-term financial goals and success Thought given to income & lifestyle in retirement Attitudes toward/confidence in Social Security and Medicare Risk tolerance/reluctance to participate in the market Obstacles to saving & investing Product knowledge & familiarity Comfort managing finances/use of external help Trust in financial institutions to help them now & in the future Product ownership and perceived need/value Desire for Guarantees & Financial Protections To what extent are they interested in financial solutions that: Offer downside protection Fixed Indexed Annuities, Annuities with guaranteed minimum account balances, Low volatility products, and Investment strategies designed to reduce risk of loss Offer a guaranteed rate of return Provide lifetime income Life policies with living benefits and/or a return of premium At what age/stage would they start using these types of products How much would they contribute/ invest in these types of products Interest in products that adjust automatically 5

6 What we can cover Test products & messaging Interest in products that do more than one thing combos & riders Do young consumers extend one-stop-shop preferences extend to the products themselves? Do they like the idea of a life policy with accelerated death benefits to cover care? How do they react to messaging that positions life and disability products as debt protection? Would they prefer an annuity with a death benefit? Automatic versus Control How much desire is there to take an active role in investing versus allowing an automatic program or product to do the heavy lifting? Do young consumers fear losing liquidity or control with certain products? Do they trust automatic products to do as they should? The A word How do young consumers react to the idea of investing in an annuity? Compared to how receptive they are to the benefits and features annuities can provide? Does the word have a negative connotation for younger generations? If so, why? Interest in Income Projections How would young consumers prefer to view their savings lump sums or as income? What is their interest in seeing income projections in plan statements, IRA statements, etc.? Do young consumers prefer to get lifetime income through their retirement plan or on their own? Are in-plan annuity options more or less appealing than purchasing an individual product? Why or why not? Have Gen Xers given any thought to whether they will leave money in their plan or rollover? 6

7 2015 Gen XY Financial Maturity Study Costs & options The base sponsorship cost for this year s study is $12,000. Greenwald & Associates takes pride in its ability to be flexible to client needs, and we will be happy to work with you if you require any oversampling, custom reports or inperson presentations. Options Additional data tabulation book $600 Oversample of 500 (example, depends on specs & reporting needs) $6,000 - $14,000 Custom white paper (5-8 pages) $4,000 Custom webinar presentation $800 Custom in-person presentation (plus travel billed at cost) $1,000 To discuss sponsorship of this year s study, contact Lisa Schneider at (202) or lisaschneider@greenwaldresearch.com. 7

8 About Greenwald&Associates Full-service research experts Exclusive focus on retirement, investments, life insurance, employee benefits, and healthcare Mid-sized firm, flexible to client needs Dedicated project teams, based on subject matter expertise and client needs In-house telephone interviewing facility at our headquarters Consistency and experience for 30 years Financial Services Healthcare Employee Benefits 8