The National Association of Retirement Plan Participants (NARPP) has released its annual “Participant Trust & Engagement Study,” which shows that overall satisfaction with providers has declined by 24 percentage points in the past six years to a new low.
NARPP says if participants were to trust their providers more, they would likely defer higher amounts to their retirement plan, be more committed to saving and have a stronger perception of their provider’s brand. Furthermore, they would be more loyal to the provider, which would put providers in a better position to cross sell products to participants.
Asked if they trust financial institutions, only 11% participants said they did, a decline of two percentage points from 2018. Only 25% of participants feel that they can always trust their employer.
As to which factors build their trust, participants said satisfaction with the education provided, transparent fees, receiving relevant information, viewing their provider as if they were a partner and believing that the information the provider gives them is in their best interest.
Forty-three percent of participants are satisfied with the education provided to them. Fifty-three percent think that education is in their best interest. Forty-eight percent think that fee information is easy to understand. Forty-eight percent think that the information provided to them is relevant to their situation, and 24% view their provider as a partner.
However, participants’ engagement with providers declined across all channels in 2019, with 41% visiting the website, 38% looking at their statement, 22% looking at investment options, 15% using financial tools, and 7% calling a representative.
Among retirement plan providers, a recent Cerulli survey found that spending more time and attention with participants builds trust. “A great client experience also manifests measurable advantages for the adviser’s practice, including a higher median client size, lower attrition rates, and the ability to move upmarket,” the report says.
Warren Cormier, executive director of the Defined Contribution Institutional Investment Association (DCIIA) in Charlotte, North Carolina, says it is imperative that retirement plan providers and advisers build participants’ trust. “Trust is one of the most fundamental drivers of behavior because it allows people to do things that are not necessarily intuitive for them, and trust is particularly important in the defined contribution area because participants are putting away money that they may not see for 40 years in the care of a recordkeeper they may not know that well,” Cormier says.
“That is, essentially, not intuitive,” he continues. “If you want participants to be saving for retirement, fundamental to that decision is how much they trust their employer and providers to do the right thing.” The same is true for inspiring participants to use and trust in tools, such as a retirement calculator, Cormier says. “The numbers speak for themselves. Participants have a low level of trust in their retirement plan providers, and there is a lot of work to be done.”
Asked to assess their financial prowess, the survey found that 42% say they are knowledgeable about finances, 30% are comfortable managing money, 22% say they are comfortable with retirement planning, 18% know how to estimate their retirement needs, and 17% understand investing.
The average level of financial stress is 49%; among Millennials, it is 60%. Fifty-six percent of men feel knowledgeable about financial matters, but this is true for a mere 29% of women.