The best time to start investing for retirement is now, but conveying this message to younger adults can be challenging. Many Gen Z and millennial individuals face pressing financial concerns today, making it difficult to prioritize saving for a distant future like retirement.
Because retirement investing is not typically top of mind for younger consumers, many financial institutions fail to engage them in conversations about retirement products.
Disha Bheda, Digital Banking Analyst at Javelin Strategy & Research, highlights in the report, The Key Step on the Bridge to Investing Maturity Path: Helping Customers Think Beyond Today, that failing to focus on future planning can leave institutions at a disadvantage, especially as more financial services firms compete for younger customers’ attention. Once these relationships are established, they can be difficult to break.
Preparing for the Unseen Future
In a previous report, the Javelin digital banking team introduced the Bridge to Investing Maturity Path, a strategy designed to help financial institutions engage and guide the next generation of investors. The path consists of six stages:
- Build a foundation of products and create an optimized account opening experience.
- Teach the fundamentals of personal finance to customers.
- Shift the customer’s mindset to long-term thinking.
- Leverage pivotal life events as springboards for investment opportunities.
- Establish a structured coaching plan to guide novice investors.
- Lay the groundwork for advisory relationships.
One of the greatest challenges in guiding customers through these stages is instilling the belief that completion is attainable. For many young adults, traditional milestones like purchasing a home or starting a family feel far off—or even uncertain.
“On the flip side, many of these customers have ascendant earning potential and, in many cases, are in line for a generational wealth transfer,” Bheda said. “They’re prime candidates to be prepared for a future they might not yet see.”
“To the extent that FIs are engaging prospective investors before they actually have significant assets, most institutions are solidly in Stage 2 of this maturity path,” she said. “They have built smooth account-opening flows; they have a range of financial products; they boast educational materials that seek to guide their customers in the fundamentals of personal finance. But young or inexperienced would-be investors are largely on their own to discover and explore these resources.”
Leading customers beyond Stage 2 is the most difficult leg of the journey, and many financial institutions stall there. However, banks can no longer afford to accept this level of engagement.
“The historic play for FIs has been to wait for when these customers have investable assets before attempting to initiate an advice-driven investing relationship with them—t hat’s too late,” Bheda said.
“Lurking outside those primary banking relationships are fintechs and specialty apps that do what most traditional banks today do not. They offer easy-to-use interfaces with enviable digital experiences, low fees, and specialized services that target specific consumer needs often overlooked by banks,” she said. “They are threats to erode banks’ ability to establish a long-term advisory relationship if they go unchecked.”
Rewiring the Customer Mindset
To address this, banks can adopt three key principles to rewire customers’ long-term investment habits: education, tracking habits through digital experiences, and setting goals.
“Education should be woven into the experience at appropriate points during customers’ digital interactions with the bank,” Bheda said. “A focus should be on emphasizing the principle of compounding to help young customers and investing novices understand that a lofty long-term goal is possible through small steps.”
Along with education, financial institutions should create digital experiences that resonate with younger consumers and help cultivate consistent financial habits. These experiences should be informed by behavioral finance principles and tailored to individual customer needs.
Even with the right tools, establishing financial discipline is difficult, and participation may be inconsistent. This underscores the importance of streamlined interfaces and gamification techniques to maintain engagement.
Establishing SMART goals—specific, measurable, achievable, relevant, and timebound—is another critical component. Banks must help customers prioritize these objectives, understand trade-offs, and revisit goals regularly to ensure progress.
“Illustrations showing how daily actions of customers build toward or detract from goals, reminders, cost-of-waiting visuals, and positive feedback help customers build a corpus and take the plunge into investing,” Bheda said.
“Prompts built into every digital interaction with the customer and digital nudges to review their progress helps shift the customer mindset into long-term thinking and achieving goals, a key to relationship deepening and cultivating the next generation of investors,” she said.
From Oversight to Foresight
As banks work to broaden customers’ horizons, they must also rethink their retirement strategies.
“Getting customers to adjust their thinking to envision longer-term outcomes is just part of the challenge,” Bheda said. “To reach Stage 3, banks will have to set aside their usual focus on short-term revenue and consider the potential for lifelong customer relationships that prove fruitful again and again.”
“Taking this further step along the Bridge to Investing is both a short-term imperative for FIs and their customers and a longer-term play for customer trust and loyalty,” she said. “For banks, the reward is a lifelong relationship that becomes more lucrative as customers mature and seek out financial products that reflect their changing lives. For customers, it’s gaining the ability to visualize their future and the confidence of knowing they have a pathway to achieving it.”
This urgency is heightened by the rise of fintechs targeting younger demographics. Educational apps like Greenlight and GoHenry, along with teen accounts offered by Venmo and Cash App, embed financial habits at an early age.
While not all provide retirement investing yet, many are evolving into holistic financial services providers. If they are firmly established with younger customers now, they will have inroads with them as they age into retirement. This has made it more important than ever to tread the Bridge to Investing Maturity Path.
“Success in Stage 3 will profoundly alter banking relationships,” Bheda said. “The shift from oversight to foresight will reposition FIs as a proactive advisor, not just a reactive provider of on-demand financial services. Digital banking will continually reinforce the FI’s advice-giving role in achieving future goals.”
