When the owner of a New Jersey medical practice with about 20 employees wanted to assist them with retirement planning while also keeping administrative and other costs in line, she contacted Sheila Jacobs, an associate manager-vice president at Wells Fargo Advisors for the Northern New Jersey market.
Once Wells Fargo thoroughly understood the practice owner’s needs, it sent out requests for proposals from third-party administrators to handle reporting and compliance, Jacobs said.
The bank was able to offer the employees a low-cost retirement plan with a mutual fund provider that offered a range of investments that allowed younger and older participants to customize their investments for growth, Jacobs said, adding it later followed up with the staff to keep them up to date on their choices.
America is eight years into one of the longest-running bull markets, and the percentage of working Americans who say the U.S. stock market is now a good place to invest for retirement has increased to 65 percent, up from 45 percent a year earlier, according to published reports.
But despite the increased optimism, a recent Wells Fargo & Co. study indicates that 38 percent of workers still say they do not think they will reach their savings targets, and 48 percent say they believe their “standard of living will fall” in retirement. What’s behind the disconnect?
“It looks like there’s still a significant gap between people’s expectations of retirement and the reality,” said Jacobs. “A lot of it has to do with a gap between people’s estimates of what they need to put away, and the amount they’re actually putting away for retirement.”
Some people simply don’t have the economic ability to save, she said, but for many middle-income and wealthier individuals who are worried about retirement, “they simply lack a comprehensive plan.”
Jacobs sees this as a business opportunity for Wells Fargo.
“We can offer helpful advice and education for clients and the general public,” said Jacobs. “You’d be surprised at how many people can see the market might be a good place to be but they just don’t know how to invest.” Part of the challenge, she said, is that “each person’s situation is different, so you can’t offer a blanket, one-size-fits-all solution.”
Wells Fargo created the online learning center Hands on Banking to provide resources for those who want to learn about money management, said Jacobs. The site offers financial articles that answer questions on a range of subjects, from budgeting tips and buying a home to improving an individual’s credit.
“Many of our financial professionals will volunteer to facilitate Hands on Banking education, and together we’ll help you and your family take charge of your financial future,” she said.
Jacobs said that even savvy small-business owners have questions about investments and other financial planning, so it created the online initiative Wells Fargo Works for Small Business. The bank serves approximately 3 million small business owners across the U.S. and loans more money to small businesses than any other bank, according to federal Community Reinvestment Act records, Jacobs said. The bank offers online education on topics such as writing a business plan, marketing a business, managing cash flow and building credit, she said.
The bank’s site, which is free of charge, includes feature stories, informational articles and videos by small business strategy experts and business owners sharing their experiences.
When asked why so many people still shy away from the stock market, Jacobs said it was due to insecurity.
“There is some substance behind it,” she said. “When you hear the news, ‘the market’ is often one of front and center topics, but when newscasters say ‘the market,’ they’re often referring to a particular index, like the Dow Jones or the S&P 500. And those are portfolios of selected stocks. If your individual holdings track those, then you’ll probably have similar results. But, if not, you may not have experienced the growth we’ve seen in those indexes over the past eight years,” she said.
She advised that individuals know their goals, and explore what kinds of investments align with those goals, timelines and resources. “Portfolios and performance should be aligned with objectives,” she said.
New Jersey residents, in particular, may face some unique challenges.
“Overall, the optimism of New Jersey residents pretty well tracks the national trends, but when it comes to retirement, the Garden State is one of the more expensive places to retire,” Jacobs said. “Residents here may need to do some extra planning, and consider the higher expenses when they develop an investment portfolio. Also, consider your lifestyle changes. Depending on your individual circumstances, for example, it may make sense to list your home a bit sooner to allow time for a sale if one of your goals is to use the proceeds to fund retirement.”
For families, it’s important to have a multigenerational conversation, she said.
“Can you stay here in New Jersey? Will you need help from your grown children? Do you want to remain geographically close to them, and is it financially feasible? These are all issues to consider,” Jacobs said.
Millennials also have their concerns. A Wells Fargo study showed they tend to be cautious but curious, she said. “They embrace mobile and other tech communications, but at the same time they value personal relationships.”
Many millennials are also apprehensive about investing having come of age in the post-2008 era, when finding a well-paying job has become tougher, and interest rates have stayed low, crimping the return on traditional savings accounts.
“About 37 percent of millennials are not currently investing in the stock market,” said Jacobs. “But more than half say they realize the market offers the greatest returns.”
Today’s investors, young and old, face some challenges, she said.
“But knowledge can empower them, because once they have information and financial education, they can more easily engage in comprehensive planning,” she said. People who know more about investing, she added, “usually find that they can make intelligent, informed decisions.”