Call to Action

Communication campaigns can underscore the value of the workplace retirement plan benefit, as well as the best ways to use the plan for participants. Competing financial priorities such as children’s educations or paying off credit card or college loan debt can hinder saving for employees who are trying to manage their budgets. With such demands weighing on participants’ minds, plus the need to save for retirement, a plan’s messaging or communications quickly becomes strained. Jeffrey Snyder, vice president and public markets practice leader at Cammack Retirement Group in New York City, calls saving for retirement a “balancing act” for participants, with the debts of past expenses on one side and a looming future on the other.

Any plan success hinges on how employees actually use the benefit, Snyder believes. Committee members need to look at their communications and education strategies as means to move the needle toward greater retirement preparedness.

Positive messaging is paramount, says Covington, Kentucky-based Brian Murphy, senior vice president of workplace participant communications at Fidelity Investments. Participants on track with savings rates and appropriate asset allocation need communication that reinforces their accomplishments. “We believe that positive reinforcement makes them appreciate the benefit more,” he says. After communicating even something as simple as “Congratulations! You’re in a good spot with your asset allocation,” advisers “can pivot back to the savings message and suggest a next step, another action they can take. We’ve seen this help boost both engagement and appreciation for the benefit,” Murphy says.

Of course, not every plan participant is on track to retire with enough savings. In cases where people are missing their mark, communications can support step-by-step goals by helping the participant focus on small, manageable next steps. “Getting them to save 1% more adds up to a significant amount that is encouraging [to them],” he says. A targeted, individualized communication illustrates what this step does for the participant over the course of his lifetime. “When they see it and say, ‘I can do that!’ it’s very motivating,” Murphy says. 

Timing and Delivery Mechanisms
Behavioral finance, a discipline that seeks to understand how and why people make decisions about their money, can play a large part in participant communication. According to Olivia Mitchell, an economist and professor at The Wharton School of the University of Pennsylvania, behavioral finance, whether used in automatic plan design features or to push out messages, can help participants accomplish what they already know is right for them. Plan sponsors increasingly theme targeted communications around such life events as marriage, having children or retirement.

Mitchell recalls how a plan sponsor recently experimented with sending reminders to participants at significant points during the year. The message that worked best: the one coordinated to the participant’s birthday. An email or a snail-mailed birthday greeting included a message suggesting the date as a good time to revisit retirement savings.

Participants also need easy access to messages. Even though enrollment increasingly takes place online, “people forget PINs, and downloading a PDF might be too complicated for some,” Mitchell says. Some plan sponsors are designing their websites for [maximum] ease of use.” One example: Instead of having to wade through unwieldy blocks of text on a webpage, a large green button invites participants to “Save more now.” Clicking through takes them to menus that increase deferrals or review investments.

Sponsors themselves also have access to excellent technology, to reach certain groups. Emily Wrightson, a consultant with Cammack Retirement in New York City, says her firm encourages plan sponsor clients to take advantage of technology offered by the recordkeeper; one example is applications (apps) for smartphones and wearables, which can appeal to different demographic groups. “Video messaging can be another effective way to reach different groups, as many people would rather watch a short video than read a paper,” Wrightson says, noting that Cammack produces such videos aimed at plan sponsors as well as participants.

Who delivers the message can also sway participants. “Instead of feeding participants a bunch of text,” says Mitchell, “mini peer testimonials can be an effective method. When people see their peers from their own workplace—not just the head of treasury or the HR [human resources] director—talking about saving more, it makes a big difference.” Communication via games or video is also much likelier to catch the attention of younger generations, she says.

It is important to make sure all messages, whether through email, on the website or through personalized messaging, are in synch, Murphy says. That way, the plan drives home a message in a coordinated way without excessive overlap or conflicting messages. He does not discount any medium for any demographic, observing that Millennials may have a slightly lower use of email, but not dramatically so. “It’s still an effective medium” for that generation, he says.

Fidelity is on the verge of testing push notifications through a Web app to mobile devices, although, Murphy says, the company tries to be sensitive to the types of messaging people want to receive through their cell phones. “Hard copy and paper mail are used primarily as backup when we don’t have an email address,” he says, “and communicating digitally with participants generates a higher take-action rate.”

Reaching Specific Groups
Plan sponsors traditionally have discussed their company’s benefit offerings primarily with new hires and often during a specific window—e.g., the time of hiring or on the first day of work, says Mitchell. At that time, the employee had to make an enrollment decision. “We’ve realized that tapping people once is not enough,” she says, explaining that plan sponsors may find that more frequent nudges work better, “perhaps at salient moments such as when [employees] are young and just starting out.”

Many plan participants can benefit from information about still other benefits, at key moments: “When you’re young and single, you might not think about health insurance,” Mitchell says, “but as soon as you start thinking about starting a family, insurance becomes critical.”

Women often lack confidence in their ability to make investment decisions, says Catherine McCabe, a senior managing director of institutional business at TIAA-CREF in New York City. This, in turn, can make them doubt they are saving enough to retire. TIAA-CREF works primarily with plan sponsors in higher education and health care, where more than half the plan participants are women, and they often voice needs and concerns specific to that group.

The company, therefore, uses language they can relate to—clear, friendly and free of financial jargon—and offers education in an environment where they feel comfortable. “Our surveys showed women prefer to learn in a collaborative setting with other women,” McCabe says. “When we invite them to attend educational workshops with other women, the response rates and attendance rates are phenomenal.” Even more important, she says, most attendees take positive action: 70% of women increased their annual plan contributions by an average of $1,500 to $2,000.

Remembering Age Groups
In 1996, the oldest of the Baby Boomers began to turn 50. In 2011, like an alarm bell sounding through the industry, the oldest of that generation turned 65 and began retiring. This year, notes Collinson, those first Boomers will start to turn 70, an age wave she joins many others in describing as “pretty huge.”

Is any other generation worth attention? Definitely, says Collinson: Generation X, which is starting its own entry into the retirement pipeline this year. The first members born into this demographic start turning 50 and enter the sandwich years of taking care of children and possibly aging parents, while still recovering from the recession. Yet, she says, at a time when this group needs to be highly engaged, it is, in fact, disengaging from its retirement plans. This inaction should be a clarion call to retirement plan advisers and plan sponsors, both of whom need to increase their efforts to communicate with Gen X through education and outreach, she says.

“There is so much focus on Baby Boomers and Millennials, Gen X is almost living up to its name as Gen X, ‘the invisible generation.’ We found that Millennials get five or six times the number of online search hits as Gen X,” Collinson says. “That’s concerning because this generation represents tens of millions of individuals who are not getting the same attention at this critical part of their lives.”

The good news: This generation still has time to greatly improve its long-term retirement outlook, but there is no time to lose. Gen X communications should start with a vote of confidence, Collinson believes, something like, “You can do it—but saving requires immediate action.” An effective, targeted communications campaign can begin by helping Gen X participants take one proactive step at a time, such as calculating retirement savings and including what expenses need to be met in retirement. Likely, they will discover a shortfall, she says. Follow-up communications can help participants build an action plan to bridge the gap; saving more, spending less, getting serious about budgeting, and reviewing investments with a plan adviser to see whether these are appropriate—are all general actions Gen X participants can manage.

Targeted communication should also encourage Gen X participants to constantly scrutinize their work and career situation. “One thing we’ve seen over and over is the many people who are forced to retire earlier than expected,” Collinson says. “One of the most important things Gen X can do is perform well at their current employer and keep job skills up to date and relevant.”

Similarly, when targeting any demographic, the more relatable the plan provider or plan sponsor can make the message for an individual, the likelier it is to engage that individual and inspire change, Collinson says. Some fundamental action steps about the importance of saving do apply to all generations, but specific demographic groups find targeted information more relatable.

Millennials, for example, are just starting their careers and adult lives. Student debt may be a challenge for them, yet many already save for retirement. Millennials need to hear messaging about how to balance their finances plus find the money to invest appropriately. “It’s never too soon or too late to start saving and investing” is a key message, Collinson says.

“Millennials need to be reminded about the importance of saving now, for tomorrow, and to be mindful of plan expenses, the impact of hardships loans and other withdrawals that can impact their financial future,” Snyder says. “Baby Boomers need messaging around decumulation and expenses at retirement, or how to take Social Security in combination with their retirement benefits.”

Customizing Communications
So how can an adviser help a sponsor tailor messages to participants? Snyder recommends working with clients to do more data mining, a method of collecting information that can help divide employees into different segments, to then review and evaluate their retirement-saving progress. Gender, age range or even job segment can be the determinant for a specific set of messages, and a different medium can be used to reach each particular generation of worker.

Broad demographics alone may not be enough to customize communication, Murphy warns.  Each generation has its favorite communication methods. The combinations and possibilities—what message to send and how to send it—may therefore seem limitless.

“The best way to [approach] messaging is to think about participants across three dimensions:  who they are, how they are performing and what they are doing,” Murphy advises. “Are they engaged? Are they actively managing their accounts? What does their behavior look like? When we engage participants with messaging that factors in these multiple dimensions, we see response rates that are twice as high.”

For example, he says, “You send out a message to all pre-retirees about asset allocation. That would be fairly generic.” The message deepens into specific appeal when the communication uses information about how the participant is performing. Perhaps some pre-retirees have failed to adopt an appropriate asset allocation for their age. “When you use that second dimension, we see the message is twice as effective,” he says.

Targeted messages should also account for behavior. For example, a highly individualized message to pre-retirees who are not  allocated appropriately, who have not changed their asset allocation in many years, can show them how they can fix this by investing in a target-date fund (TDF) or managed account.

“They’re not engaged,” Murphy observes. “You can message them in a way that makes them feel it is very much about them” and advise them how to solve the problem of their inaction. The use of each metric shows more movements and actions such as how many people click through or call, based on a message, he notes. The take-action rate and level of follow-through also soar, because the message has given precise next steps that are specific and personal to an individual’s situation.

Murphy gives another example: Instead of attempting to communicate broadly with all Millennials, Fidelity takes a look at how participants perform. There are some great Millennial savers, he points out, “but there are many who are automatically enrolled at lower amounts. Through language testing, we also find that [Millennials] do not respond to the word ‘retirement’ very well, so we de-emphasize the word and talk about the benefits of long-term saving.”

Communications campaigns are critical to the success of retirement plans and, thanks to technological developments, can be more personalized, a trend that can only accelerate in the future.

Targeted Messages to Various Demographic Groups

Key Takeaways:

• Tailor messages to life events 
• Consider different mediums and messages for various demographics 
• Look at participants’ balances and allocations

Art by Sarah Mazzetti