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The Future of Employee Engagement – Part 1

Almost before it has even taken off, financial wellness seems overdone, at risk of becoming an overused buzzword. But in reality, we have just started and we need to get back to basics with some common sense fundamentals to engage, not just educate, workers in DC plans.

The ideal or auto plan using behavioral finance principles will get participants 80% of the way toward gathering enough assets — if they start early. That doesn’t mean we should give up on engagement, especially since we have not come up with a widely embraced retirement income solution yet. So let’s review some basic principles about adult education with the DC plan system.

Principle #1: Adults Learn Differently

Adults don’t learn by listening – they learn by interacting. That’s a problem because most advisors and providers do not know how to engage. At worst, they stand behind podiums or text-heavy PowerPoints, spending half the time with their back to the audience pointing at or reading their slides. Yikes! At best, they are slick and entertaining. The results are similar.

Adults don’t trust experts. Along with sales cynicism or a well-deserved lack of trust of financial institutions, adults think that experts don’t know what it’s like to be them. They learn infinitely more from peers.

Principal #2: Generation Gaps

Different generations want to engage in different ways. A recent Wells Fargo/Gallup poll showed that older workers (50+) want to speak with an advisor to allocate investments, while younger ones prefer the Internet or online tools. While speaking to an advisor and using the Internet are tied as the top method at 58%, 63% of older workers prefer an advisor, compared to 52% of younger workers; 66% of younger workers prefer using the Internet, compared to just 49% of their older counterparts. Online tools are preferred by 58% of younger participants and 35% for older ones.

My point: Teaching everyone the same way is ludicrous.

Principal #3: Get Personal

Though TDFs are generally better than the alternative and keep gathering steam, not to mention assets, does it really make sense to put everyone born within a 5-year period into the same asset allocation? There’s enough data out there, whether on record keeping systems or other sources, to create more customized solutions.

And why can’t we engage people about making suggestions about their plan when something like a raise or promotion happens, or by comparing their status to those of their peers? Or force people to answer questions that create a risk profile that can match them with a managed account? Everyone can answer questions about their favorite subject – themselves. Few understand investments.

So what would the future look like if we really learned how to engage DC participants, account for generational differences and get personal using big data? That’s the focus of Part 2.

Opinions expressed are those of the author, and do not necessarily reflect the views of NAPA or its members.