Can We Fix Participant Education?

There are lots of theories on why financial education within DC plans doesn’t work well. But that doesn’t stop the industry from spending billions of dollars on it, with tens of thousands of advisors conducting education meetings. Is it stubbornness? A fiduciary hedge? Or is it just part of the process of figuring it all out? Christopher Carosa lays out the issues in a thoughtful post featuring some practical lessons.

One plan advisor thought he nailed the education meeting by getting lots of engagement — using humor and eliminating industry jargon — only to discover that attendees remained uncertain and uneducated. Part of the problem is the “curse of knowledge” — that is, better-informed parties find it extremely difficult to think about problems from the perspective of lesser-informed parties. Other issues are that some people can get embarrassed in education meetings and that the information provided is not personal. Also, people learn more from peers than from experts. 

One robo-advisor, Personal Capital, developed an app to track spending as part of an effort that resulted in nearly 20% less discretionary spending. UCLA’s Shlomo Benartzi, the guru of behavioral finance for the DC market, noted that the answer will come from a combination of Befi and technology.

Using BoulevardR’s Retiremap, plan advisor Blue Prairie Group won a PSCA Signature Award for Innovative Education with a $75 million, 250-participant client. The program engages participants using interactive tools on iPads, which feed the advisor information to customize the one-on-one meetings. Working with Dan Ariely to develop their system, BoulevardR found that 95% of people who started actually completed the questionnaire; 56% doubled their deferral rate. 

The key difference is that RetireMap is a solution, not education. The problem, as with many apps like this, is traveling the “last mile” to integrate with record keeping systems.

Employing technology and Befi to provide a solution — not education — that is delivered by a person and is integrated with record keeping systems seems like a sensible direction. But there is no silver bullet — just the next executable step.

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