Plan sponsors and participants alike report dissatisfaction with the way the retirement plan industry educates and communicates, according to Laurie Rowley, president of National Association of Retirement Plan Participants (NARPP).
“Part of the problem with [participant] engagement centers on the undeniable fact that the materials people are interacting with are complicated, confusing and disempowering,” she says.
Addressing issues in retirement savings is complex, and can no longer rest in the hands of service providers alone, she contends. “Change requires collaboration, innovation, and action. If communications materials are not engaging people, you have to throw out the old model and come up with something new.”
According to Rowley, plan sponsors have unanimously embraced a more intuitive, simplified approach to participant communications in a new program from NARPP—Intuitive Sustained Engagement (ISE). The program also outperforms traditional education and communications programs by successfully engaging consumers in better financial decision-making, she says.
According to Warren Cormier, chief behavioral officer of NARPP, the design of ISE builds deeper engagement by transforming complicated, dense language into a very clear concise presentation of the relevant information. “We feel education is an important channel, but the goal is to engage employees in better financial behaviors in order to get better outcomes,” he says.
“ISE has the ability to transform the way financial information is presented in a way that empowers and informs the user,” Rowley adds. “I don’t think ISE can solve all of the problems with engagement, but it is a giant leap forward in the right direction.” Gone are the gray blocks of dense copy, tiny numbers and bar charts. Instead, simple statements in plain English give accessible information about the difference between stocks and bonds, and describe how a target-date fund (TDF) works.
The program’s primary focus is to create deeper levels of engagement with retirement savings decisions. Understanding the benefits of the benefit is one of the ways ISE helps to create engagement, Rowley says. “We make the plan sponsor the hero by using language that reflects the plan sponsor’s brand and business,” she explains. The language makes very clear that the participant stands to gain financially by engaging in the company’s retirement plan.
While some pushback has come from service providers, Rowley emphasizes that the nonprofit organization’s compliance attorneys, whom she calls “some of the best in the country,” have thoroughly reviewed all pieces of the ISE program. “Some have even suggested that our pieces are more compliant, because they are more understandable,” she says.
At the heart of what NARPP does is an approach that folds in information and techniques from several disciplines, not just behavioral economics but marketing, consumer decision-making and intuitive design. Rowley says the organization sees NARPP’s role “at the nexus of human-centered design and behavioral finance.”
Cormier explains that ISE works through several channels. They drew on research to see how best to make information more relevant and more accessible. “We wanted to eliminate confusing charts and industry jargon,” he says. “People can’t relate to it: it’s not engaging.” Then, the number of required decisions in each piece had to be minimized. Participants disengage when they are shown long lists of decisions, Cormier notes.
Not all participation problems are solved through auto-enrollment, Rowley contends. “Auto enrollment is a powerful tool in the toolbox, but it is not a full-stop solution to retirement savings.” According to research, saving rates are lower with auto enrollment, she says. “People who join passively may continue to act in a passive manner with their retirement savings. This is something are going to be exploring in our 2015 participant study.”
Rowley feels that auto enrollment must be supplemented with appropriate engagement strategies that encourage better saving habits. She feels the industry will likely continue to evolve in its approach to presenting content to plan participants.
“I believe the retirement industry needs to take a page from successful brands like Apple and Nike,” she says. “Less focus on the products, more focus on the user experience. If your potential customers are not using your products, don’t blame the customer, change the message.”More information about NARPP is on its website