Compared to last year, the CAP Member Survey shows a small decline in the number of plan participants who review their retirement investment statements (32% versus 33%), go to websites to review account balances or retirement plan information (32%, no change), consult a personal financial advisor about their employer-sponsored retirement plan (18% versus 20%), use online or hard-copy retirement planning tools to make investment decisions (14% versus 18%), attend educational sessions (13% versus 17%), or go to a website to make transactions on their employee retirement savings plan (12%, n/a).
Karrina Dusablon, director, education, training and communication services, with Desjardins Financial Security, views the frequency with which tools are used as a wake-up call for plan sponsors and providers to find new avenues to emotionally connect with members. “We have to find a way to build a relationship with people to excite them, to entice them and to make them engaged in their retirement plan,” she says. “Often when we present information, people say, ‘So what?’ because they don’t understand how it personally affects them. We need to use short, personalized messages that speak to people individually, even though we are speaking to the whole.”
Also disturbing this year is that only 30% of members self-report an excellent or very good understanding of their retirement plans (compared with 44% in 2010). When broken down by specific area, few claim a high level of understanding in the following areas: 26% for asset allocation, 39% for their own risk tolerance, 24% for the amount they need to contribute to their retirement plan to retire with the amount of money they need, and 33% for their plan statements. Still, most members are satisfied with the frequency of communications they receive (72%) and with the content of those communications (74%).
“Without a good understanding of their retirement program, members don’t appreciate the plan sponsor, nor do they take advantage of the plans,” says Michelle Chusan, senior manager of retirement programs with Hudson’s Bay Company. “We know that most members aren’t interested in becoming portfolio managers, so we are now de-emphasizing the investment side to focus on other issues such as understanding their plan, why they should maximize their contributions and take advantage of the lower fees of their group plan versus retail. We’ve also introduced a new investment solution that can automatically rebalance their portfolio every five years, aligned to the member’s age, so it can be a lot easier for them.”
Demographics seem to play a significant role in plan members’ level of understanding, with men, older participants and higher-paid employees more apt to claim excellent or very good understanding of these items associated with their retirement plan.
“Members tend to feel more knowledgeable and engaged as they approach retirement,” says Carol Edwards, manager, business development, Great-West Retirement Services. “However, early engagement is key, given that retirement income adequacy is determined in part by how soon members enrol in their group plan and how much they contribute. Both automatic enrollment and automatic escalation of member contributions can ensure members are better positioned to reach their retirement income needs. Further, conversations about retirement should be reframed to focus on wealth accumulation, financial fitness or financial independence, which may resonate with more members, rather than as a distant future event.”
Virginia Alderman, marketing communications director with Manulife Financial, agrees. “Although the older group has become really focused, we need to offer more investment options that don’t force people to pick and check. And before we talk about returns, we need to help members understand how maxing contributions works, because they may be leaving a lot of money behind.”