Financial education by itself can accomplish only so much in the context of retirement saving, a new report from asset manager BlackRock concludes. Timely, simple, actionable messaging is equally important and is the critical missing piece of most corporate financial wellness plans, researchers found.
Nearly half of retirement-plan participants say the communications they receive about their 401(k) do nothing to help them make decisions, according to the report, written in partnership with the nonprofit National Association of Retirement Plan Participants (NARPP). This may come as a surprise to employers that send out all those disclosure documents, plan updates, and supporting materials.
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Despite all the paperwork—or perhaps because of it—most employees glaze over at the “dense, overwhelming and confusing” presentation of choices and other material, BlackRock found. This leads to mistrust.
Less than half of participants believe that the information they receive is always in their best interest. So they may freeze and, say, miss out on part of the company match. Or they may overreact and, say, grossly over- or under-weight exposure to an asset class.
The report shines a light on the limits of legal requirements and dutiful disclosure. But even though it offer a wealth of information, this material is a poor substitute for clear guidance that raises a worker’s level of financial literacy and leads to wiser money decisions.
The NARPP tested a different approach, and it helped boost enrollment by 25 percent in just six months at a state 457 supplemental savings plan. Workers were offered regular, easily digestible advice at key moments. Here, the hallmarks of this guidance.
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Keep It Simple
Clear, direct language and a jargon-free optimistic conversational tone boosts trust, which leads to engagement and better outcomes.
Show You Care
Employees want to know that you understand their struggles and problems and that the advice you offer is always in their best interest. Cover the basics and demonstrate concern for long-term goals.
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Offer Real Guidance
Provide a clear, easy path through simple, connected messages. Show participants the path from decision to action to results. You might label the steps 1, 2, 3, and so on.
Offer the right information at the right time — don’t flood people with large amounts of information at isolated touch points, such as the enrollment period.
Use a minimum of text. Include simple graphics. Each communication should have only the information that is essential to making a specific decision.
These guidelines may seem obvious. But with employers so focused on limiting their liabilities and costs, the obvious approach often gets lost. That’s one reason retirement education is so important in the first place: so that individuals don’t have to rely on guidance that can leave them tearing out their hair. Employers can do better. Part of financial education's role at work is to reinforce good financial behaviors through the right kind of messaging.
This article was originally published by Dan Kadlec on rightaboutmoney.com.