Consumers tend to worry about “high-touch” products, such as credit cards and bank accounts, more than they worry about long-term savings accounts, such as their workplace retirement plans and IRAs, a new study warns.
Nearly 80% of American consumers are concerned about financial fraud, according to a LIMRA Secure Retirement Institute study, “Financial Fraud and Retirement Accounts: An Opportunity to Engage, Educate and Build Trust.” And even though a quarter report they have been a victim of financial fraud, the levels of concern vary significantly across the different types of financial products.
Concern about credit card fraud was found to be the most prevalent at 83% of American cardholders. At the same time, however, only 53% of retirement plan savers are concerned about fraud with their workplace retirement plan.
Ryan Scanlon, associate research analyst with LIMRA SRI, explains that, “While it may be natural for consumers to worry more about products they use more often, recent LIMRA research confirms that the incidence of fraud is increasing among individual life insurance contracts, individual annuities and DC retirement plans.” Scanlon notes that this development is driven not only by the increased appeal of financial accounts holding larger amounts of money, but security advancements for credit and debit cards have also prompted criminals to reevaluate their targets.
“The 30 percentage point difference between consumers who are concerned over their credit card and those who are concerned over their retirement plan highlights a dangerous blind spot – one that offers financial service companies an opportunity to engage their customers in a truly meaningful way,” Scanlon emphasizes.
Millennial Weakness
Compared to older generations, Millennials were the least likely to say they were concerned they could be a victim of financial fraud. Yet, they were also the most likely to say they had been a victim of fraud in the past two years – 17% of Millennials versus 11% of Generation X and 12% of Baby Boomers.
Millennials may mistakenly believe they are not a target because they might have a lower account balance compared to their older counterparts, the study suggests. An additional reason may be that younger consumers are more likely to engage in risky behaviors – such as sharing too much personal information online – that might make them an easy target.
The study further found that Millennials were the least likely age group to check their retirement accounts at least once a quarter for fraud. Less than half of Millennials check compared to nearly 60% of Gen X and more than 70% of Baby Boomers.
The good news is that they are open to financial service companies telling them more about what they should do to prevent fraud. LIMRA also finds that one in three Millennials “strongly agree” that they wished they knew more.
In addition, Millennials say they are more likely to consolidate their retirement accounts if it would help prevent a fraudulent account – with more than 6 in 10 saying they would do so. Younger consumers are also more likely to accept longer financial transaction times than older generations, according to the study.
Overall, more than two-thirds of consumers indicate they want to receive information about how to detect and prevent financial fraud from financial service companies. Other top sources of information consumers identified included credit bureaus (45%), financial advisors/planners (32%) and companies that manage retirement savings plans (29%).
The study was based on a survey of 1,005 American consumers aged 18 and older, fielded in August 2018.
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