In the latest episode of Plan Talk, Retirement Director Ben Rizzuto discusses why it’s important for retirement plan sponsors to listen to plan participants in order to understand their needs – particularly during these challenging times. He suggests plan sponsors can gauge investor sentiment by reviewing participant surveys and record-keeper reports and use that data to create better education programs and resources.
Ben Rizzuto: Hi, this is Ben Rizzuto from Janus Henderson Investors, and you’re listening to Plan Talk: the podcast dedicated to the latest news and trends in defined contribution.
On this episode we’re looking at how to better listen to your participants. From surveys to focus groups, we’ll explore the different ways you can tap into their thoughts, feelings and fears. And we’ll share some helpful data that we’ve uncovered here at Janus Henderson.
When something wonderful or terrible happens to you, what’s your first instinct? It’s probably to tell someone.
Unquestionably, a lot has happened to the clients, participants and truly all of us over the past several weeks.
The problem is that we as humans are inherently terrible listeners, and this is an idea the Kate Murphy explains and explores in her new book, You’re Not Listening. Luckily, if you read her book, you’ll find that she provides several tactics that we can use to become better listeners.
These are useful when you’re talking to another individual or in smaller groups, but how can we better listen to a larger group? How can we better listen to the dozens if not hundreds of participants within our retirement plans?
Unfortunately, we’re all busy and this becomes more difficult as numbers increase, which leads plan sponsors and advisors to become, as Murphy says, “cocooned in unquestioned beliefs and fixed concepts… [where] nothing is ventured beyond the borders of what we already known or accept as true.”
For those of us who work with retirement plans, too often, participants can become nameless, faceless numbers within a plan. They are a set of deferral rates or balances that come together to become the average or total assets or participation rate.
Through that lens and at that level, it can be incredibly difficult for a plan sponsor or advisor to understand the thoughts, feelings and needs of participants, whether it’s at the group level or the individual level.
The question is, how can we better listen to participants? Especially now, during a time when the markets are volatile and participants may be more than a little fearful about their 401(k) balances, their jobs and their retirements.
Today, I’d like to provide some ideas of ways to better listen to participants, whether it’s in conversation or through data. The hope is to be able to get into their heads and understand their thoughts and feelings and fears. Because if we’re able to do that, then we’ll be able to better help them lessen financial stress and better meet goals.
Participant Focus Groups
If we start small, let’s think about the small group meetings that plan sponsors periodically have or may be especially important to schedule during this period. During these meetings, you can remind participants about the benefits that are available to them, but really this should be a forum where you listen to participants, you answer their questions, and they are able to feel comfortable to voice the concerns they have, the issues they’re struggling with, and explain how they view the retirement plan.
You should view this as a focus group. Think of this time as if you’re a marketing or product specialist for a company attempting to parse the comments and underlying emotions of participants in order to come up with a great new product. There’s a very interesting story in Murphy’s book about how Swiffer cleaning products were developed. And if you really want to dive into this subject, look up Naomi Henderson as she is thought to be one of the best focus group moderators in the world.
Success in these conversations really comes down to asking better questions. So, let me offer a few ideas that may help in this area.
We all know about the idea of open and closed questions. When asking a question, we want to make sure that the person we’re asking can’t answer with just yes or no or another one-word answer.
So, first, think about the questions you might ask a group of participants. Are they closed probes or are they leading questions? Are they questions that start with, “Do you”, “Can you” or “Will you”? These types of questions might also end with you asking, “right?” For example, “You like Buicks, right?” or “You know that we offer a company match, right?” or “You know I have that appointment tomorrow, right?”.
These are questions that we use every day, and they are useful because they provide quick answers for our quick lifestyle. For our purposes, sure, they may help you know that yes, a participant knows that the match percentage is 5% for the plan.
But do they really give us anything? They don’t help us get any closer to understanding how to create an environment where that participant uses that feature because they see value in it. Nor do they help us understand why participants may or may not being taking advantage of plan benefits.
Also, one thing to note regarding “why” questions. You may ask, “Do you know the match is 5%?” and a participant may say, “yes”. Then you may ask, “Do you defer 5%?” They may say no. You follow with, “Why?”
Note that this could put people on the defensive. “Why” is provocative and it leads to a “I’m right, you’re wrong” situation. Plus, this won’t get you any closer to the information you want to get. In fact, it may widen the distance between those two points.
So, instead of “why,” consider something like, “What were some of the reasons that you used in making the decision to defer less than 5%?” or “In retrospect, how has that decision affected you?” Or you can always fall back on, “Tell me more about that…”
Another way to get people talking and provide opportunities to listen is by accessing self-talk. This is something that everybody does. We are always talking to ourselves in our heads, but we have been trained not to talk about it. Maybe we’re trying to be polite, maybe we’re not trying to seem as if we’re crazy. But this is where we can really get to the heart of how people are feeling.
In order to do this, ask people “What did you say to yourself when you saw this or heard about that?” This shows people that it’s okay to discuss what went through their head and allows you to access this self-talk.
For us, maybe the question to ask is, “What did you say to yourself when you saw the market go down 20%?” Or “What did you say to yourself when you opened your account statement after the first quarter?”
What Are You Listening For?
Finally, before going into these conversations with participants, it’s important to think about what you’re probing for. But don’t let “what you’re listening for” lead you too much. This research should help inform your steps – it shouldn’t be used to confirm what you already believe or already want to do.
So, create a list of probes that you’ll use, such as “help me understand," or “tell me more about that” or “please expand on that.” The real data is hearing where people stand on things, and by doing this, you may find that other circumstances, whether they be financial, technological, social or otherwise, are the real issues that need to be overcome.
Participant Survey Data
Sitting down and having conversations with each and every participant may not be feasible, or it may be a long-term process. If that’s the case, what can we do in the meantime?
One option is to simply keep up with industry surveys. For example, in our most recent Top DC Trends and Developments Guide, we highlighted the Alight Solutions Index. Here the record keeper provides monthly data on trading activity for the participants within plans. In February, it began to see higher trading activity by participants. In fact, February 28th saw the highest trading activity in the history of the index. More importantly, this increased trading activity showed that participant assets were shifting from equities to fixed income, stable value and money market funds.
Another interesting survey came from the Employee Benefit Research Institute (EBRI) and Greenwald & Associates. Their 2020 Retirement Confidence Survey was fielded in early January and found that 69% of workers were confident they would still have enough money to live comfortably when they retired, including 27% who were very confident.
That was January. What about after the coronavirus wreaked havoc on the markets?
Well, they re-fielded the survey from March 20 through March 30, and while people were feeling equally confident in their ability to live comfortably in retirement, the companies found that worker confidence was down when it came to being able to take care of basic expenses in retirement in that 24% were very confident in March vs. 33% in January. Along with that, having enough for medical expenses in retirement saw a change, as the percent who were very confident decreased from 22% to 17%. As well, having enough money to last their entire life saw the exact same decrease, 22% to 17%, over that period. Finally, when it came to planning for the future, 48% have tried to calculate how much money they will need to live comfortably in retirement. However, more than eight in 10 indicated they would find it beneficial if their employer offered them help with calculating how much is needed for a secure retirement.
Plus, and I think this is incredibly timely based on the economic impact of the coronavirus, fewer than four in 10 have planned for emergency expenses, planned for how much to withdraw from savings or calculated how much is needed to cover health expenses.
Fidelity did a similar review of participant accounts and only 7.3% of participants opted to change their 401(k) allocations during the first quarter or 2020, up from 5.2% during the final quarter of 2019. But despite that relative calm, Fidelity reported a marked increase in customer engagement, with average daily customer calls from retail and workplace investors, up 20% from a year earlier.
Along with that, new data from Fidelity showed 164,950 401(k) investors took a distribution in the first quarter of 2020. However, others chose to stay invested, or increase savings, as average contributions stayed steady at 8.9%, and 15% of savers even upped their contributions.1
Now, you may say this isn’t my plan, these aren’t my participants, but even though that’s the case, I feel these types of metrics can help us directionally and help us ask the right questions. For example, even if participants are figuring out how much they might need for retirement, might they need help, like the 80% of participants in the survey we just discussed? And if that’s the case, might that help us create better education programs and resources for participants?
Finally, when working to listen to your participants, make sure you are leveraging your record-keeper. Your record-keeper almost by definition will have a record of every type of interaction, trade, phone call and mouse-click that occurs by participants. On a quarterly basis, if not more frequently, you should be able to get a comprehensive report summarizing plan level details about distributions, loans, call center inquires, mobile app usage as well as all sorts of other data.
Along with that, your relationship manager may even take the extra step, during review preparation, to look at transaction history. By doing this, you’ll be able to get an idea of if participants are feeling financial stress, if they are changing their deferral rates, or if they are changing their investments. If financial stress seems to be on the rise, through increased loan or distribution activity, it may be time to reevaluate your financial wellness and education programs.
Items to consider would include discussions around setting up emergency savings accounts so that participants have money set aside for unexpected expenses, such as housing or medical related expenses. Remember, its these types of expenses and the lack of emergency savings that pushes participants to take a hardship distribution or plan loan. If you see an increase of this type of activity, it may be worthwhile to consider plan level changes, such as the distribution and loan provisions of the CARES Act.
If you’re seeing changes, specifically decreases in deferral rates, this speaks to issues that participants may be having regarding financial stress, which goes back to our financial wellness programs and or emergency savings. Or it may be worthwhile to review your auto-enrollment and auto-escalation programs.
Within our educational programs, it may be helpful provide more guidance to participants on some of the behavioral aspects of finances. My colleague Matt Sommer wrote a blog post that goes over some of these ideas, which you can find on the Janus Henderson Blog. But, for example, consider the behavioral science idea of affect (that’s spelled AFFECT). Affect shows us that our emotional associations can powerfully shape our actions. So, if you have participants who are seeking more help from the recordkeeper or are changing their allocations, it may be helpful to create a program that helps participants imagine their future selves one, three and five years from now. Then ask if the participant’s future self – given this idea of going to cash or becoming more conservative – would feel a sense of regret if the markets eventually rebound. This helps participants keep their long-term focus and reminded me of a story we talked last year, where the University of Pittsburgh started a program which had participants think about and create what was called their personal “Financial Story.” Not only did this get people thinking about what their future goals were, but it helped them see that the decisions they would make now would affect their future selves and their ability to reach future goals.
From an investment standpoint, it’s also important to view trading activity with a keen eye. Now, with this data, it may require an ad hoc report from your record-keeper, but here you’ll get an idea of what participants are doing once they seek the help they require. Are they shifting assets from equity to fixed income, or all the way to cash? Are they investing assets in another target-date fund (TDF) vintage, or are they supplementing their current TDF with other funds in core menu? All of these may not be in their best long-term interests. It could highlight how education is needed around fund types and asset classes. It may also shine on a light on the fund options that are available to participants. Volatile periods like this provide an important time to review the options in the plan menu and truly judge if they provide sufficient diversification options and the ability to create solid allocations during early, mid and late career periods.
So, there you have it. Are you still there? Are you still listening? It may go against our natural impulses and does take work since our minds think a lot faster than people talk and we can listen, but it is so important, especially when we are trying to bring value to our relationships. Whether it’s personal, professional, or the participants we serve within retirement plans.
We all have needs and we all want to communicate our wants, wishes and fears through our actions and what we say, but it can be tough to decipher if we’re not listening. Sure, it may be tough when you’re looking at a large, diverse participant population but if you look for what plan data is really telling us you can hear what your participants are saying. And if you have the opportunity to talk with someone, make sure you really listen to the person across the table or on the other end of the video conference. Remember we have two ears and one mouth for a reason.
With that, if you’d like to hear more, remember that you can subscribe to this podcast and others from Janus Henderson via iTunes or Spotify. And if you’d like to continue the conversation, feel free to reach out to me. I’d be grateful to hear what you think or about your experiences with plan participants during these interesting times. You know I’ll listen.
Until next time, I’m Ben Rizzuto and thanks for listening to Plan Talk from Janus Henderson Investors.
1“Vanguard and Fidelity investors didn't flinch as the market tanked.” Yahoo! Finance, April 25, 2020.