The 2019 PLANSPONSOR National Conference kicked off Wednesday afternoon in Washington, D.C., starting with a wide-ranging town hall session featuring Joe Ready, head of Wells Fargo Institutional Retirement and Trust, and Tim Brown, senior vice president of life and income solutions at MetLife.
The pair fielded a series of questions solicited in advance from plan sponsors attending the conference, with an emphasis on addressing their practical challenges and successes in terms of boosting plan participant outcomes.
The first question for the pair asked what plan sponsors should focus on doing once they have reached strong average participation and deferral rates, and after they have streamlined the investment menu.
“Once you reach this point of having a quality plan in place, you need to make the effort to stay grounded as a committee on your philosophy of what success will look like over time,” Ready said. “It is always important to ask, what is your philosophy for having this benefit and is this philosophy remaining the same over time? Plans can always be improved, especially if you want to offer a top quality plan that will attract and retain talent.”
Both Ready and Brown agreed that a great next step after quality plan designs are implemented is to now focus on communicating that plan design effectively across the employee base. This can be quite a challenge as the size, diversity and complexity of the workforce grows.
“How much am I going to invest in those communication strategies? This is a question that plan sponsors have to weigh in addition to asking what their philosophy is and how generous and progressive they want to be,” Brown said.
Next the pair was asked for suggestions about how to grab employees’ attention when there are many different and generous benefits being offered.
“People absorb information in different ways, so you have to be methodical about how you are framing the behaviors and actions you are trying to promote in your plan,” Brown suggested. “Above all, your communications have to make things seem approachable and manageable. If we start to put people in different categories and frame the communications against their investment horizon and their unique challenges and risks, this will get their attention. Additionally, we know that people in general are pretty competitive and interested in what their peers are doing, so that’s another avenue to consider, using peer anecdotes and even elements of gamification.”
Ready agreed, saying the retirement benefit communications need to be “simplified, individualized and humanized.”
“We tell young people that, if they can save 10% from early in their career, they will have real control over their future retirement,” Ready said. “We warn them clearly that, if they wait, they will lose more and more control over their future. That’s how you humanize this conversation.”
Asked about the best ways to talk about retirement income products with plan participants, Brown said, it is important to frame annuities as income insurance—not as investment funds.
“Pure and simple, annuities are insurance,” Brown said. “In addition, we need to talk more about the fact that annuitization is not an all-or-nothing proposition. For pretty much every retirement investor, there is going to be a need to balance liquid savings, insurance protections and long-term investments.”
According to Ready, it makes a lot of sense to talk about annuities in the context of equity market volatility and the opportunity to create an “income floor.”
Turning to the hot topic of “financial wellness,” Ready and Brown said, all clients are talking about this, but there is still no single definition or expectation.
“These programs are important, but they are always going to be evolving,” Ready said. “In my mind, we need to make it clear that financial wellness goes beyond the asset allocation. It’s way beyond asset allocation. It’s about budgeting, the timing of retirement, minimizing taxes, and so many other topics.”
Ready and Brown both emphasized that, while many free services may be available, quality financial wellness services are worth paying for. They agreed that the amount of financial wellness spending can pay for itself five times over in terms of promoting better outcomes.
“We have to change the whole discussion about the value of financial wellness. People will be happy to pay for something where they see a clear value,” Ready said.
Brown pointed out that, in the marketplace today, some financial wellness solutions are very retirement focused, while others are much more holistic, so it’s important to understand what the point of any given service or solution is, along with asking about the fees and the compensation model.
“In our experience, once you hook somebody and get them interested in the basics of saving and budgeting, they will be hungry for more information,” Brown said. “Some may even become interested in creating a one-on-one advisory relationship. It’s up to the sponsor to decide how much access to provide to these types of services in the workplace.”
The final question in the town hall session had to do with the importance of emergency savings programs in terms of promoting better participant outcomes. Ready and Brown, on this point, agreed that the power of “compartmentalization” and “virtual envelopes” should be explored.
“There is a real psychological and behavioral benefit to earmarking dollars that are coming in for specific purposes, such as emergencies or big-ticket purchases,” Brown said. “People can still access this money, but it’s earmarked right out of the gate, as soon as the paycheck comes in. There is already strong evidence emerging that this compartmentalization approach really helps people prepare for emergencies, and to therefore get in a better position to save for retirement.”
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