Broadridge released a new white paper examining the impact of targeted participant communications programs on the retirement readiness of three generations in the work force—Baby Boomers, Generation X and Millennials. The research finds that effective communications can offer a competitive edge for retirement providers and plan sponsors, but the costs run high if communications programs aren’t implemented efficiently.
According to the whitepaper, retirement plans integrating digital components into print and in-person strategies can save between 10% and 20% in annual plan-related communication costs. Digitally-enabled approaches can also generate double-digit improvement in participants’ adoption of important retirement plan features, along with significant participation rate increases, Broadridge says.
“Generational differences, varying plan features, and increased compliance requirements have created complexities in retirement communications,” says Diana Awed, vice president, mutual fund and retirement solutions, Broadridge. “Retirement providers need to develop a framework for designing new solutions that will improve the participant experience, drive participation and reduce costs.”
Different generations currently in the workforce require a personalized and streamlined communications plan to improve engagement and help the industry address the nation’s retirement challenge, Awed says. Broadridge finds four important trends are emerging as providers rise to meet the challenge of delivering more personalized, contextual and interactive communications to plan participants. These include:
- Segmentation – Life-stage communication programs targeted by age segments will increase in importance as Baby Boomers retire and Gen Xers and Millennials become the backbone of retirement plans.
- Channel optimization – Retirement providers must deploy highly efficient techniques for communications delivery, including per-participant personalization, an “opt-out” approach, and much more extensive and integrated use of digital and social media.
- Data integration and management – Sourcing, storing, managing, analyzing and using accurate participant and plan data remains a key challenge in delivering the types of personalized and targeted communications that will drive better participant outcomes.
- Metrics – Retirement providers and regulators increasingly focus on retirement outcomes as the primary metric of plan success. However, an equally important focus should be on delivering these positive outcomes at a cost that is reasonable, sustainable and competitive.
For retirement plan providers, offering advanced communications capabilities continues to be a double-edged sword, the white paper notes. While effective communications can offer a competitive edge for a provider in a commoditized industry, delivering these communications adds costs in a thin-margin business under increasing fee pressure.
Meanwhile, automated plan design, new plan features and new technologies have created still more opportunities and complexities that must be considered when building a communications program.
Overall the report shares a somewhat gloomy picture of the U.S. retirement system—suggesting early Baby Boomers may be the last generation to achieve true financial security in retirement. While many in this age group have enough savings and wealth to replace nearly 70% to 80% of their pre-retirement income, late Baby Boomers are on track to replace only 60%, Broadridge finds. Generation X, at the median, are projected to replace only half their income, and the majority of Millennials are much more concerned with paying off debt and meeting current expenses than with retirement savings.
Providers are striving to overcome participant inertia by delivering more personalized, contextual and interactive communications, the report finds. To do so, they will be required not only to leverage data more effectively, but also to persuade plan sponsors to approve automatic, multi-channel programs for participant communications.
The paper finds some firms have already begun to create concrete strategies to address these opportunities, but many are still formulating their retirement communications plans. Many service providers and plan sponsors are focused on the more immediate tactical issues at hand, Broadridge observes.
However, all can agree that the need to find real solutions has never been greater, the paper says. Broadridge also presents a framework in the paper for designing new solutions for the next-generation participation experience.
More data and an executive summary of the paper are at www.broadridge.com/DCComms.