Having studied the effectiveness (or ineffectiveness) of employee education and communications programs for years, one thing is obvious: A radically new approach is needed.
The retirement industry spends millions of dollars annually on education and communications, yet we show no real improvement in engagement or savings rates. So-called “state-of-the-art” communication programs are still filled with: confusing jargon, suffer from “The Curse of Knowledge”, and demand that participants make multiple decisions about how to invest and manage their life-savings all in one setting. Clearly this approach is not working.
It may not sound radical, but we need to do is: simplify the messaging and concepts, speak in participants’ terms, ask participants to make one decision at a time, and contextualize the impact of financial decision-making. The most important initial goal in participant education is to actually make people participants in the program. It is not to make them a Roth IRA participant, who auto-escalates their deferral rates, has a perfectly balanced portfolio for their risk profile all at one time. Certainly, these are important decisions but they don’t have to be made on day one, they can be made overtime.
We want engaged participants. When we ask participants to make all those decisions at one time, they often become confused or overwhelmed and disengage. This is an important point, because optimally, what is in the best interest of all stakeholders is that participants have sustained engagement with their retirement savings.
In my role as Co-Founder of the RAND’s Behavioral Finance Forum, I have been involved with some of the best thinking in behavioral finance. In early 2014, NARPP invited me to be part of a team that was tasked with reinventing employee communications. The goal of this team was to re-engineer communications and education in way that would accomplish the following goals: increase and sustain engagement with retirement planning, increase plan participation, and increase savings rates. As you might imagine this was no small task.
Joining me on the “challenge” were a handful of experts from various fields, including, Dr. Punam Keller of Dartmouth. Professor Keller is an expert in consumer financial decision-making. She has developed a decision making model called Enhanced Active Choice, (EAC). With the EAC model, the individual is asked to make a choice in the context of the potential impact of their choice. The result of this enhanced and contextualized information is that the individual is more likely to take action in a way that positively impacts future outcomes/maximizes gains. The impact on participation in live field-testing has been astounding.
The team also includes award winning designers, communication experts and strategists. This interdisciplinary team has developed what is perhaps the one of the most effective behavioral interventions I have seen, it is called: Intuitive Sustained Engagement (ISE).
Intuitive Sustained Engagement™ (ISE™) is an engagement and savings enhancement tool that is designed to create deeper levels of engagement with savings information and increase participation and savings rates in employer-sponsored savings plans.
ISE is influenced by Professor Keller’s work with EAC, along with best practices in behavioral finance, choice architecture and intuitive design. NARPP has initiated field- testing with four major plan sponsors and the results so far have been impressive. Current testing involves increasing plan participation in voluntary and auto-enrollment settings, increasing deferral rates, and increasing participation in auto-escalation programs. This program will be expanded to other areas in 2015.
NARPP’s mission is to help secure a more financially stable future for everyone. The development and implementation of ISE into communications and education programs, helps bring us all one-step closer to seeing NARPP’s mission realized.