An Interview with Mary Ellen Whiteman By: Gabriel PotterMBA, AIFA®

For the benefit of readers, how do you distinguish advice vs. education for employees?

There is a definition we have been using as sort of a guidepost internally that might be helpful here. There are 3 criteria that would need to be met that would indicate that something has moved from guidance to advice. The first is around the recommendation to the advisability of buying or selling a security—so a very specific recommendation that says you should buy this, sell this, or invest here. It has to be something specific to the individual’s unique circumstances. 
The last is whether the recommendation serves as the primary foundation for a decision. So, you may be in a situation where a specific investment is recommended, but other data is being used to compare one decision vs. that specific investment recommendation. It’s very much a very specific, individualized type of recommendation in which the participant acts based on that recommendation. That is the advice definition we have been using. 
Guidance comes in a lot of different forms, but generally the way we speak about guidance is that it’s a set of recommendations or options that a participant can use for further decision making or further analysis. 99.9% of what we do is provide guidance versus advice. We do provide in general— through 3rd party services—the level of advice investors require. But I would say on the whole, most [investors] don’t engage—they have the option, but the adoption of those types of services is pretty low.

In your opinion, what is it – advice or education - that the typical employee actually benefits from? 
It’s typical to say guidance, but [I think] it’s more of the education and guidance. It will certainly vary among investors, depending on their level of sophistication and interest. So, how interested are [employees] in keeping on top of things and doing it on their own, versus the people who want a specific directions. Most people want to be told what to do, but there are also a lot of people who want to be validated in what they already think. And so it is definitely a balance across those dynamics. It ultimately will depend on sort of that level of sophistication and interest the investor has in this type of topic.

There have been studies which question the efficacy of participant education programs. Companies can throw money at education campaigns without new enrollments. How can employers avoid this?
There are two core ways. I would say from an employer’s perspective, there is communication happening about the 401k plan, and then there is communication about the participants. Generally speaking, at a plan level, the things that are happening in a plan (fund changes, plan match, etc.) are not necessarily messages that are efficient—because it’s really from an inside out viewpoint. So, as a sponsor, you have a job to communicate specific things about the plan, but ultimately those specific things aren’t the things most relevant to the participant. [Communications are] very broad, non-targeted. Not only does participant communication need to come from the participants point of view, but it also needs to be very targeted to what they need to the extent providers can know their participants well enough to be able to communicate relevant messages—that’s the efficiency. Ultimately if it is not relevant to the person who’s reading it or interacting with it, it’s going to fall on deaf ears. It’s not going to hit them at a level where they are going to take action because it’s not necessarily relevant to what they are thinking. That is a really important thing to consider, because ultimately if it is not about the participant or not relevant to the participant, it s probably not going to get through. 

What’s a good rule of thumb to how hard employers should try to engage employees? Does safe-harbor give employers protection? Does the law of diminishing returns mean that employers can feel satisfied once they’ve pushed hard enough, and where is that point?
Generally, I don’t know that I would necessarily declare it as a rule of thumb. What is the right number of times to engage or convey a message? I would say that in most cases, what happens is it’s not enough or it’s too broad of a message. It all goes back to being targeted—you could hit somebody with a message over and over and over again, but if it’s not a targeted and relevant message, even the first time it goes out it’s probably not the right use of resources and not right way to do it. As you get more targeted what are the right number of touch points? I think that is the magic answer we are all looking for. We use a communications rule of thumb here, it’s more of a note that we have in our head which is “an average adult needs to hear a message repeated seven times before they retain it.” This is sort of an old marketing rule of thumb, but it doesn’t say how the message is conveyed, because everyone learns differently: some people are auditory, some people like visuals, some people prefer hard-copy mail. It’s also about understanding what’s the right mix of conveying those messages; knowing that people are getting so many different messages. It’s also about differentiating and how to get your message to stand out. I think that’s some of the things that we all sort of struggle with and we are trying to think through the best way to get our messages through in sort of the clutter of messages that are out there.

Is there a particular demographic that most benefits from targeted education? 
I would say we have found that the pre-retiree population, which we define as aged 50 and above, are the most engaged. That’s inclusive of digital properties, but they’re in need for more high-tech solutions as well—their needs are more complex. They tend to have higher balances just through sheer force of time versus the amount of time they have been saving. There are also several milestones that are happening up to retirement around thinking about further investing, distributions and drawdown—what that is going to look like? How they are balancing their priorities in retirement? So we do get a lot of engagement from them, typically via phone, but also through webinars—they have a high engagement rate as it relates to those. They are really just looking for a lot of information, whereas the younger investor tends to be a little harder to engage. This is for two reasons: one, they are not the type from a demographic prospective that often spends a lot of time on this type of thing and secondarily, they are not necessarily engaged on this topic—it’s too far out—[retirement is] just too elusive to that population for it to be a reality. Whereas when you get into the pre-retiree population, you tend to have more engagement as you get towards the end of that population. If you get to 55-60, even the 50-55 age range, you could still get people just beginning to think about it.

Alternatively, are there demographics which are particularly hard to engage? 
I would say generally 35 and below. There are a couple of things that we attribute this to: they may not have as much discretionary income as they tend to earn less and they don’t necessarily have a long-term savings view yet. The other thing we would say is that while they are very tech-savvy and digitally engaged, the topic isn’t as relevant to them and that doesn’t help. I would say the other areas in which we circle are people who have not participated in their plan for a long time—so people who have been with a company for years and don’t participate—trying to get them to engage can be a challenge. Lastly, it’s people who are not digitally engaged. The direction we’ve been going, and are continuing to go, is through digital engagement and digital channels and if people are not engaged in that way, they are going to be receiving a lot less in terms of education.

What has been the single most effective way of engaging employees? How much did it help? 
This is where I will go back to targeted messaging. As we have evolved the way that we communicate—away from plan level messaging to targeted, more aged-based and milestone messaging—we have seen much greater engagement in all of our communications. Our emails that we send are sort of topically based by age group as well as our webinars. As an example, we have a program of webinars that we did in 2012 as well as 2013. Year-over-year, we saw three times the attendance at those webinars as we have made them more targeted. The engagement is higher, the actual attendance is higher, and we are seeing satisfaction scores go up as a result of the content being more relevant—that single-handedly is the most effective thing. It’s not necessarily about unique messaging that no one has ever thought of, or differentiating messaging, but more so the ability to really break it down and make the interaction as personal and relevant as possible. That is what has helped us engage more people.

What has been the biggest failure you’ve seen in terms of participant education & engagement? What went wrong and, ideally, what lessons can others learn? 
Really it’s some opportunities that have been missed in the past. I wouldn’t say there is necessarily one thing that sort of jumps in my mind. Tied to my last comment about being more targeted, we don’t always have access to information, especially through the [plan] sponsor. There are data points about participants that are of high value when it comes to educating them about their financial priorities. For example, the number of children or the birthdays of children. So if they have a college savings goal related to those children, we aren’t going to know based on the [limited] information that a sponsor transmits to us. We are not going to actually help [employees] meet their goals or provide information contextually if we don’t know about them. So ultimately, what we want to do is become more knowledgeable about all of our participants. I think learning more about investors and being able to use that data to personalize their experience, is a missed opportunity. This is going to become increasingly important as we ramp up our digital experiences. Secondarily, historically there has been a fine line between what we talk about from a 401k and a retirement perspective, and what we talk about beyond that. We have been very siloed in the way we communicate to participants about their 401k—not in relation to all the other things they are facing from a financial perspective. And not even from a financial, but from a retirement perspective. So there are clearly other retirement vehicles that can help an individual meet their goal, but the way we traditionally communicate with them is specifically only about their 401k. I think that is doing a disservice to these folks because, broadly, there are other things they may consider— whether it’s debt management, setting up an emergency fund, or saving for college. For investors who reach certain limits, there are retail products and services that can help them meet their goals that we have not historically brought tinto mind for these participants. So that is another opportunity as we move forward: to not be inside-out thinking, but really outside-in and thinking about the participant as an investor. What is it that I need to know? What tools and resources are there to help me meet my goals that are holistic and not too focused on one particular thing? Taking that lens will allow us for more opportunities in terms of really getting folks engaged and getting them the education they need.

Imagine you sit on a board of a medium sized corporation and the committee has given you carte blanche to make any single change you want to engage employees for retirement planning. Is there a specific action that works for most businesses that you’d recommend or does your answer specific to the company?
This sort of applies broadly, but I think it’s a matter of how you do it and how much you invest. Ultimately, the best way to engage is through digital properties. It allows an efficient way to personalize the experience without necessarily having to rely on a human to do so. I would compare it to phone consultations and phone conversations, where it is high-touch definitely, but also high cost and also not necessarily the channel of choice for all investors. Really think about how we replicate all those interactions that are high touch and are very relevant and personalized: How do we replicate those from a digital perspective? What I recommend is that we need to have an ongoing, user-focused effort on all digital properties to bring them together. We can be thoughtful on how the website works with iPhones vs. iPad, etc. Where do we want people to get what they need from us? Being very purposeful about that and also dedicating not only funding to ongoing iterations, but also using a very customer-focused development process to help us really understand what users want—that type of process is one in which you will end up with the right digital experience and one that helps you meet your business goals. I would recommend that sort of discipline be invested in and supported and not just “one-and-done”. [Support] an ongoing nature to keep up with changes in technology as well as to keep up with changes in the expectations our customers have.

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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