UpFront | Published in June 2017

Beyond the First Generation of Digital Tools

Stand-alone tools and services offered to plan participants are underutilized, for a variety of reasons

By Javier Simon | June 2017
Art by Eric Hanson
Plan participants today have access to a wealth of digital tools designed to help them manage every facet of their financial lives, from basic budgeting to long-term planning for retirement. However, there is evidence that stand-alone tools and services offered to plan participants are underutilized, for a variety of reasons.
To boost better digital tool usage—and, by extension, better outcomes—retirement plan providers and their sponsor clients are moving beyond the first generation of stand-alone digital support tools and into the realm of “gamification.” Here, tools and how they are used get enhanced through application of the key lessons of behavioral finance. Outlined below are several emerging strategies plan sponsors can adopt to make the most of technology and digital tools.
1) Consider the user experience. When it comes to participants and use of new planning technologies, it’s all about user experience. It takes only seconds for a person to decide whether he will stick with a particular app. Shane Bartling, senior retirement consultant at Willis Towers Watson, says the most effective tools “deliver very crisp, personalized experiences … We’ve seen in the last few years an appreciation for improved user experience.” Bartling notes that these tools “need to be honest.” They need to deliver “a message that doesn’t feel like someone is trying to sell you something.”
2) Make it social. Tapping into participants’ competitive nature can also go a long way to improving utilization of digital tools and resources. The ultimate goal of such gamification is to encourage positive behaviors by showing a comparison of people’s progress/outcomes in a clear and compelling way.
David Ray, head of institutional retirement plan sales at TIAA-CREF, says “The more competitive [a tool] seems, the more engaged participants are. “With competition, we find 40% to 50% more clicks than [without].”
Ray suggests that establishing a friendly sense of competition is not hard, and it can go a long way to influencing behaviors. The firm and its clients have seen particular success, implementing calculators that generate “retirement scores” that can be compared across a work force.
“The technology solution is a key component of a multi-pronged approach that’s necessary to be effective in this space,” says Bartling.
Often, the technological component can function as a type of first step, encouraging employees to get more engaged with their finances before eventually seeking in-person advice.
Ray says TIAA explores patterns among the different tools used to engage its participants. “We can see if they’re using retirement-income projection tools and whether they seek out advice after that. We find there is definitely a correlation between the two.”
3) Rely on data analytics. Plan sponsors need to track—and leverage—data about the usage of technological tools offered to participants. This data can provide useful insight about what part of the work force needs more attention and what kinds of communication strategies would be most effective.
Sponsors can dive into this data and segment it by age, gender and other demographics to find clues as to how to proceed and potentially boost engagement with digital tools and resources.
“We know the retirement topic in general has some of the lowest scores in terms of knowledge among employees,” Ray says. “Only 53% of the quiz questions we ask are answered correctly. Generation Y scores lower on retirement investment topics, while Boomers score lower on health and security topics. Based on that type of information, you can do targeted communication for Baby Boomers on health costs in retirement, or an educational seminar for women.”