A New Day
The firm has determined that tools and education, not a revision or reduction of the investment menu, will improve participant outcomes. In fact, funds were neither added nor removed based on the analysis. Instead, the sponsor will pursue the following improvements to promote retirement readiness:
- Target participant education on asset allocation to nudge participants closer to the efficient frontier.
- Implement an auto-rebalancing feature to help ensure that participant portfolios stay on track.
- Review the tools currently available to participants and determine if additional participant tools could be made available and would be beneficial to use in selecting and modeling core investment portfolios.
- Continue to solicit feedback from employees looking for improvements to the plan.
- Modify plan design to encourage 401(k) savings through increases to auto-enrollment, auto-escalation and company match.
The firm’s belief that its participant population can rise to the intricacy of its investment menu may seem like a disruptive concept for a workplace retirement plan, but in the consumer arena, it’s not new. Innovation in consumer technology did not stall at a perceived level of users’ tolerance for complexity. Instead, intuitive and engaging technologies have nurtured consumer capabilities, enabling people to confidently navigate a range of digital experiences and increasing opportunities for self-service.
Within financial services, and specifically retirement investing, the rise of robo-advice has been a well-tread topic, as it promises to increase savers’ access to insights at lower costs. Research from Cerulli Associates finds investors’ openness to “robos” has increased as recently as 2015, with investors seeing digital intelligence as a kind of diversification beyond analog advice.1 Digital insights can take the form of tools modeling the portfolio effects of contribution or investment changes or dashboards offering access to additional resources.
We see these themes trending globally in State Street’s 2019 Global Retirement Reality Report (GR3), in which we spoke to retirement savings plan decision makers in the United States, United Kingdom, Ireland, Australia and the Netherlands. Across the markets, 75% of plan decision makers cited the ability to access advice as the attribute participants valued most in a retirement savings plan, ahead of ease of use (73%), low costs (67%) or investment design (46%). By complementing digital platforms with human advice, sponsors have opportunities to balance efficiency with judgment, support more informed investment decisions and facilitate better outcomes.
Mirroring a corporate philosophy defined by the pursuit of precision, the firm profiled here has stayed true to the retirement savings objectives of plan design strength — offering a high-quality, diverse investment menu — and informed participant engagement — maximizing retirement readiness efforts. Leveraging data, modeling and constant curiosity to explore and enhance its offering without sacrificing quality and complexity, the firm has found its formula for success by daring to see differently.
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