Some advisors say that education in DC plans should be completely eliminated other than as a fiduciary hedge, arguing that instituting automatic features is more effective. But that sounds counterintuitive, since planning for retirement is such an important activity for everyone. Putnam’s Bob Reynolds makes the argument for education while acknowledging the benefits of automation. Reynolds argues in his blog:
… automation does not mean an individual contributing to a retirement plan should avoid thinking about and making educated investment choices. What it does mean is that the educational component of retirement savings needs to fit into today’s auto-pilot mindset.
So what does that mean, practically speaking? Forcing everyone to get educated the same way may not be the most efficient use of resources, and may not have the best results. Targeted education for various types of investors makes more sense. Reynolds suggests segmenting them this way:
• people who don’t want to be actively engaged;
• tinkerers; and
• those who don’t participate.
People need to be engaged to some degree in a DC world in which they’re managing their own personal DB plan — like it or not. Hoping that automation will cure all problems is wishful thinking and misguided at best.
