“The Myth About Participant Education”
The myth that colorful statement stuffers and interactive websites will turn your non qualified plan participants into asset allocation experts is only that, a myth. It’s a simple fact: we as an investment community are failing to provide basic investment guidance to plan participants. If you ask a plan participant how they picked the funds in their plan they usually give you a sheepish smile and say they are not sure. Now there is a real financial plan for you. Is it the participant’s fault here? No, it is the plan sponsor and plan advisor’s fault.
I work with plan participants every day and you can build the best websites and participants won’t use them. Think that a webinar will work? They won’t. I used to speak to participant groups and try to make the meeting humorous and interactive. I was hoping that everyone in the room would immediately race out of the meeting and adjust their asset allocation or think about deferring more into their plan and guess what-usually nothing. Last month I met with a group of 25 participants and was told later by the head of Human Resources that I must have done a great job because four participants told her that they were going to start contributing to their non qualified plan. She was ecstatic. I thought that was pretty good as well as usually everyone does nothing. You see, I know group meetings fail as well. Just like hoping a participant visits that website or listens attentively to the webinar all this is usually a waste of everyone’s time.
So what is the solution to this dilemma that is causing millions of Americans soon to be retirees to not be retirement ready? Very simple. Active, individual face to face participant meetings. One on one meetings. The meeting should not only explain the benefits of this unique benefit, but should also find out the individuals risk tolerance. Once that is known it is fairly easy to put an asset allocation model in place. Meeting with that individual EVERY YEAR to review the investment strategy is a must.
Most people here will inherently understand that a strong one on one education/advice program here will work better than websites or webinars as well as group meetings. Put these passive participant programs away and put an active program in place.
In conclusion, most non qualified plan committees try to do a decent job in understanding the basic investment costs and performance of their non qualified plans. Where they failed is implementing a strong, active education program. As I said to one committee recently: “We can spend all this time every year making sure the plan costs and investment performance are competitive yet no one is thinking about how we are going to deliver a strong message to their valued employees on why they should use this unique benefit and how to create an appropriate asset allocation model for each person once they do start using it”. Plans that fail to deliver that critical help to their key employees are likely to fail. If the goal of the plan is to ensure that each key employee has all the tools necessary to give them the best chance to be retirement ready then why are so few companies not doing it?
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