In the world of retirement plans, automatic features get the job done, but advisers must go further than that if they'd like to get employees interested in saving at work.
There is no denying the benefits of allowing participant inertia to get employees saving. Data from the Employee Benefit Research Institute shows that only 4% of employees participating in a defined-contribution plan would stop their contribution if they were automatically enrolled into a retirement plan at 3% of salary.
Fully 3% of employees would stop their contribution if they were automatically enrolled at 6% of salary, a savings rate that's far from perfect but nonetheless closer to attaining retirement security in the future. EBRI, as part of its 25th annual Retirement Confidence Survey, interviewed 1,003 workers and 1,001 retirees.
But an adviser who is truly effective with workplace retirement plans knows that employee success requires more than merely enrolling everyone into a target-date fund at a 6% deferral rate and letting employee inertia take over.
“I don't like the term 'set it and forget it,'” said Jania Stout, managing director and co-founder of Fiduciary Plan Advisors at HighTower Advisors. “The worst thing the industry has done is come out with this saying, that with target date funds and auto-enrollment, you just set it and forget it. It's too big a deal to just forget about it.”
Success in the retirement plan space will require advisers to get employees engaged in their retirement plan and psyched up to save. For advisers, that means rethinking your communication strategy when interacting with plan clients and workers.
BEHAVIORAL SCIENCE AND RETIREMENT PLANS
Stephen Wendel, principal scientist for workplace financial wellness firm HelloWallet, covers the behavioral science behind employees' failure to utilize their benefit programs in his new book "
"Improving Employee Benefits".
“The challenges are the common human frailties that we all have,” he said. “If we want to do something, we procrastinate. We have limited willpower. So very often we think that employees must be stupid and lazy, and that's not the case.”
In the realm of retirement savings, there are two ways to help employees save: Either you do it for them, or you make it more natural and pleasant. Enter the good and the bad of automatic features in retirement plans. “When you auto-enroll, you're not engaged,” Mr. Wendel said. “If people aren't engaged, if they don't even know they're enrolled, they get a pot of money and they'll spend it.”
Workers need to care about that pot of money they're accumulating, even if they're the sort to throw their quarterly statements in the trash without opening them.
Communication is key at this point. Sometimes a redesign of employee communication will be enough to jump-start interest. Mr. Wendel notes that engagement doubles when employees receive documents that are clear — and contain bullet points and images — versus something that looks like legalese.
• State your call to action in email communications, posters and newsletters, and describe the benefit if you're promoting an employee event. Tell them what they need to bring. “Get clear guidance on your retirement plan” is more effective than “Hey, come to this meeting,” according to Mr. Wendel.
• Set a time and a date for employees to meet with the adviser. In-person help with personal finances and enrollment is a great feature, but workers are more likely to use it if they commit to a time and date. “Setting the time and date of when you want to do something has a tremendous impact on follow-through,” Mr. Wendel said.
• No bribes! Employees will show up to a meeting if there's food or a chance to win a prize, but that's no guarantee they'll actually be paying attention. Make them excited for the content, instead. Hopefully, you've clearly defined that content in your messaging.
• If you're helping clients increase employee engagement, be sure to have goals and track your progress. Pilot test your changes as you roll them out to the employees and have a “control” group so you can measure results. Keep your samples random. “It's better than surveying people about how they felt,” Mr. Wendel said. This works with emails: Have two small groups of employees receive two different employee engagement emails, and see which email yields a better response.
MAKING IT WORK
Forward-thinking plan advisers know that effective communication to employees requires flair, so Ms. Stout ropes in a marketing expert when she's talking to plan sponsors. This could be someone who's already working in a marketing capacity at the plan client or even someone at the vendor — an expert who can be creative.
In one client situation, Ms. Stout noticed that the employer was posting screens all over the work site, so she decided to have plan stats flow across the bottom of the screens like tickers. “One goal is to get more people aware of rebalancing,” she said. “This company has 3,600 participants and about 1,500 of them are building their own portfolios. Only 44 of them are rebalancing.”
A plan sponsor's marketing department can also zazz up the otherwise-boring posters that vendors send along to encourage employees to save, Ms. Stout said. She also has someone on her team who is a participant success coordinator and sits in on meetings with clients.
She's also looking at other resources to help refine employee communications, and make them fun and interactive.
Jellyvision specializes in interactive marketing and has done some work on the health and welfare benefits side.
Advisers looking to ramp up their marketing game need to hire someone whose sole focus is on participant success and engagement. “It doesn't cost a lot of money,” Ms. Stout said. “There are people out there who have a communications background and are just a few years out of college. They can come in as a salaried employee and get this done.”
