As discussed in our previous post Better Participant Outcomes: The Problem, one of the biggest issues preventing better participant outcomes is participant apathy. If one of the barriers is participant apathy, what is the solution? The solution is advisor-driven participant education. Advisor-driven education is a powerful concept. Instead of asking participants to overcome their natural tendencies and educate themselves, advisors drive and control targeted education to overcome common obstacles to retirement saving.
Advisor-driven education uses a three-pronged engagement process to connect personally with participants: connect, internalize, and initiate. Let’s unpack the three components of the engagement process to understand how they help participants internalize the information and then motivate them to take action.
Step 1: Connect
Advisors begin engaging participants by connecting them to the information being presented. This cannot be done by handing out generic materials about investing and asset allocation, or by sharing icebreaker jokes or anecdotes. Participants connect when the information being presented is both relevant and understood.
The most powerful thing an advisor can do to make this connection is to provide each participant with simple, personalized information. Participants connect when they receive a brief report that shows them the size of their retirement gap and how bridging that gap would affect their take-home pay. The information must be relevant (specific to their retirement) and easy to understand (without the minutiae of asset allocation, Monte Carlo methods, fees, and funds). If participants are not ready for retirement, then the report must show in the simplest terms the available options and a clear plan for improving retirement readiness.
Providing personalized, easy-to-understand retirement readiness materials creates a powerful connection and inserts participants into the retirement planning process.
Step 2: Internalize
Advisor-driven education focused on engagement has two distinct advantages. First, it overcomes the natural human tendency toward inaction, which too often results in doing nothing and never visiting the 401(k) web portal. Second, it puts actionable, personalized information directly into the participants’ hands. Doing so ensures that participants face their retirement savings situation, at which point many realize they are not saving enough for retirement.
As participants review their own information, they connect with the process and begin to internalize what they have just learned. For those who are not on track for retirement, this internalization helps them understand their predicament and the need to make changes if they want to improve their chances of a healthy retirement.
Step 3: Initiate
Once participants have connected with the process and internalized the information, they are motivated to take action to get themselves back on track. The personalized report helps them understand that they aren’t doing enough. They can see the retirement projection and understand the options available to them. Participants are motivated to do something about their retirement shortfall, and they are in the room with the person who can best help them get the ball rolling: the advisor.
The Benefits of Advisor-Driven Education
Proactive, advisor-driven education has benefits for participants, plan sponsors and advisors.
Participants obtain a deeper, immediate understanding of their retirement situation. They know precisely what they need to do, and they are in the room with the advisor who can help them make the necessary changes. They receive not only education that connects them to their retirement situation, but also motivation and guidance to take action. This improves their chances of a healthy retirement.
Plan sponsors benefit from advisor-driven education when they witness increases in participation levels and increases in deferrals. Furthermore, because participants understand and appreciate the education, they are more inclined to roll other assets into the plan. Employees who are ready for retirement are less stressed, more efficient, and less likely to delay retirement—all of which benefit the plan sponsor.
Finally, advisors benefit when the education they are providing results in higher plan participation, increased contributions and a greater number of participants who request one-on-one meetings for in-depth retirement planning. Many advisors state that their business has more than tripled with this advisor-driven approach. The new approach allows advisors to differentiate themselves from all the other advisors who continue using traditional, passive techniques. When advisors have all the tools needed to help participants understand and internalize their information, they can more easily move into individual meetings, often discovering unmanaged assets that can be rolled into the plan. And satisfied plan sponsors are loyal to advisors who motivate and engage participants.
At the end of the day, when advisors take control of the education process by engaging participants with personalized retirement information and projections, they create the opportunity to significantly grow their business and help others. It’s a win-win-win situation for everyone involved.