Education/Advice | Published in April 2012

Study Partners

Finding the right way to educate participants

By Rebecca Moore | April 2012
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Illustration by Nick Iluzada

With Americans’ retirement confidence at an all-time low—and with the hit many of their retirement accounts took in the recent recession—the need for education and advice is more important than ever.

Although retirement plan education and advice historically has encouraged employees to participate in their retirement plans and outlined their investment choices, many employees are now looking for broader financial training to help manage their finances and find the money to save for retirement.

The challenge in any participant communication is getting employees’ attention, says Todd Perala, managing director of relationship management at BMO Institutional Trust Services. Instead of trying to make employees become investors, an education campaign should be a call to action and instigate an outcome, he suggests. Many vendors are able to offer help with such educational programs. For example, BMO’s RightTrack planning tool for participants presents a customized action plan based on a participant’s current retirement savings and investment situation. In addition, participants may request one-on-one meetings with an adviser or education specialist to develop and implement a more comprehensive long-term financial plan, as well as continually monitor their progress and adjust the action plan to meet any changing needs. 

Perala says plan sponsors typically have depended on providers to design and provide education for employees, but he believes that may not be in participants’ best interest. Employers know their employees better than providers do, he notes, so they should partner with providers to prepare a program they can implement to help employees secure a better outcome.

Another relationship that plan sponsors can leverage is with the company’s bank. They can ask whether their bank will deliver broader financial literacy education. Retirement plan advisers can support retirement education, as well.

Perala adds that it is best if all parties work together in the development and delivery of a communications campaign to present the plan, and sponsors should leverage the best products or services each party offers.

Topic Development 

When designing a communications campaign, plan sponsors should look beyond offering an education session about investing (usually an hour long) once or twice a year, Perala advises. Instead, educational campaigns should: have a distinct focus, whether surrounding a specific issue (such as increasing deferral rates) or a participant demographic (20-somethings or preretirees, for example); use direct marketing before and after face-to-face meetings; use a simple and straightforward message; focus on a specific outcome; and issue a call to action.

When seeking an education solution, plan demographics are especially important, says Donn Hess, managing director at J.P. Morgan Retirement Plan Services. Sponsors should look beyond the traditional metrics used, such as participation rate and deferral rate, and look at income replacement rates (especially by age cohort), as well as participants’ personal rates of return. It is also important to understand employees’ engagement patterns—whether they regularly check their accounts or are more passive.

“Spending some time getting to know the participant population drives strategies and the types of communications that plan sponsors want to use,” Hess says.