Now is a good time for advisers to encourage plan sponsors to broaden the conversation with participants from a narrow focus on retirement to a more holistic view on financial wellness. By shifting the conversation, you can help plan sponsors better engage their employees with both their workplace retirement plan and their financial lives.
In many ways, engagement is the Holy Grail for plan sponsors, who want to encourage participants to take full advantage of their defined contribution plan. In fact, the task at hand is a larger one: helping participants feel connected to and in control of their financial lives. Plan sponsors can use inflection points — both participants' life events, such as having a child or changing jobs; and corporate milestones, such as a re-enrollment or compliance-mandated disclosure mailings — to boost participants' emotional connection with their financial lives, including their retirement plans.
For many participants, saving for retirement is not a single goal with a single focus. Instead, it is intertwined with decisions they face at various life stages. These decisions can include day-to-day budgeting, debt management, and medium and long-term financial planning.
When you look at engagement in terms of participants' overall financial lives, you'll see myriad opportunities to help them connect their finances with their broad life goals and improve their engagement with their DC plan. This can be a game changer for plan sponsors who are anxious to increase participant engagement.
WHY ENGAGEMENT MATTERS
There are practical reasons for devoting time and energy to improve engagement. Plan sponsors want participants to benefit fully from the plans they offer. Participants need to save at high enough rates to take advantage of the plan's benefits, including any matching funds and the power of compounded growth. They should also understand the importance of leaving money in their plan, and the consequences of withdrawing it or taking loans to fulfill other financial goals, such as buying a home.
People are unlikely to retain that kind of information if it's provided as a dry footnote to a product disclosure they receive at a random time, when they're not even thinking about, for example, drumming up a down payment for their first home. Yet that's how companies often communicate with participants.
The reality of busy, demanding lives is that communication about retirement plans often focuses on requirements, like annual disclosures — not a message that will drive broader engagement. More proactive communication strategy can help par-ticipants keep retirement, and financial well-being, top-of-mind.
Plan sponsors' adoption of automatic features, such as auto-enrollment, mean that participants no longer need to take an active role in certain decisions involved with saving and investing in workplace retirement plans. That change has been a net positive because more people are saving, which is boosting general retirement readiness. However, when participants are on autopilot, they may not fully understand the long-term purpose of retirement savings and how that relates to the rest of their financial goals.
What if the communication to participants was more connected with life stages and better promoted the resources plan sponsors already offer? In the evolving benefits world, the concept of a total rewards program is catching hold. Plan sponsors can help many employees save for retirement and manage their financial lives better by simply connecting the dots between their financial milestones and the bevy of benefits they provide.
For example, participants may be interested in their employer's home-buying seminar. The company should take advantage of the opportunity before and after the seminar to remind employees that drawing a down payment from their retirement savings is short-sighted, and then com- municate with them more broadly about budgeting and balancing multiple financial goals.
The first step toward taking a more holistic approach to plan communication is simply to understand more about participant demographics, which means going beyond averages to look at more granular issues. Does one department have many people on parental leave? Does another seem to skew younger? Are lots of your participants nearing retirement or working past retirement age? The answers can help determine new touch points for connecting with them.
Megan Yost is head of defined contribution participant engagement at State Street Global Advisors.