At last week’s Rand Behavioral Finance Forum, academics, government officials and industry people gathered in Washington to share ideas and research on how behavior finance can help consumers with a focus on retirement. Only one record keeper, Hugh O’Toole from MassMutual, presented — among a bevy of top researchers. O'Toole focused on how his firm has implemented many behavioral finance theories to achieve dramatic improvements in outcomes for its clients.
Improving participation rates and escalating deferrals are important milestones, but ultimately outcomes must be measured to determine if the methodology is effective. Record keepers are in the unique position of being able to implement the changes — with their clients’ permission of course — and accurately measure the results.
MassMutual has been able to work with 500 clients to improve outcomes, primarily through plan design, but also through better participant engagement. The results are astounding. Using actual data, the percentage of participants on track to retire comfortably improved from 44% to 64% after suggested changes were made. The changes included using behavioral finance plan design techniques (some of which came from Allianz’s work on the subject) and new ways to engage participants.
Rand’s 2013 Forum, founded by BRG’s Warren Cormier and UCLA’s Shlomo Benartzi, showed how academics, government and business people working together can be an industry-changing factor — especially when providers like MassMutual adopt and implement these innovations.
