Retirement plan providers' investments in technology are paying off

The investments that retirement plan providers are making in technology appear to be encouraging participants to engage more with their finances.

A quarter of plan participants now prefer to receive 401(k) account information via email, up from 9% in 2020, while 86% said digital savings tools and calculators offered on the provider’s website are very or somewhat helpful, up from 77%, according to recent research from Cerulli Associates. Nearly three-quarters of participants expressed the same sentiment about digital content like articles, videos and webinars posted on the website, up 20% from 2020.

Record keepers and third-party providers have worked to improve digital experiences to better connect with people under the age of 30, who are more likely to rely on a provider’s website, mobile apps and text messaging to review 401(k) account information, Cerulli found. Some firms have adopted “journey-based” website designs that guide participants through certain online procedures, such as enrolling in a plan or making an investment selection.

Firms are also continuing to expand and improve their presence on social media, according to David Kennedy, a senior analyst at Cerulli.

“Generation Z exhibits a greater preference for digital communications and social media from their provider compared to participants overall,” Kennedy said in a statement. “Building a positive and encouraging experience with a record keeper at this early stage in Gen Z participants’ financial lives may make them more likely to continue an investment relationship in future decades.”

Plan providers are also using algorithms to determine who's most likely to benefit from certain recommendations and using email blasts or behavioral nudges to specifically target that group. For example, firms can send content about the benefits of saving early to younger participants, while older clients receive information about transitioning to spending assets in retirement.

Chatbots are increasingly common on providers’ websites to answer common questions and help participants navigate through their plan. More advanced chatbots, such as one that investment advisory firm Faircourt Partners built in partnership with Dream Forward, are using machine learning to answer questions without a prewritten library of content.

Many of these new technologies still require employees to share personal information with providers, which remains an ongoing hurdle. While Cerulli’s research shows that participants are generally comfortable sharing personal information, the biggest barrier exists around connecting nonretirement savings account balances, with 31% saying they are uncomfortable making this available. This compares to a person’s weight (29% feel uncomfortable sharing) and chronic health conditions (28%).

However, information about held-away accounts is necessary to realize the full benefits of financial wellness apps and initiatives, Kennedy said.

In his report, Kennedy recommends providers “continue their efforts to not only improve both the experience and the educational content of their wellness offerings, but to also pair those efforts with data privacy policies -- and persistent messaging about those policies -- to help relieve the anxiety that may prevent employees from making full use of these valuable programs.”

[More: Edelman Financial Engines launches workplace financial wellness platform]