Shlomo Benartzi has always had a knack for figuring out what motivates people. For example, when he was in elementary school in Israel, he quickly figured out how to escape the boredom of a typical math class.
Shlomo Benartzi has always had a knack for figuring out what motivates people. For example, when he was in elementary school in Israel, he quickly figured out how to escape the boredom of a typical math class.
“If I yelled the answers to all the questions the teacher asked, she would have to kick me out: "Shlomie, go out!'” Mr. Benartzi remembers.
A professor at UCLA's Anderson School of Management and the chief behavioral economist at the Allianz Global Investors Center for Behavioral Finance, Mr. Benartzi is known for his ability to turn ivory-tower research into real-world solutions, especially in the retirement sector.
“There have been a couple of decades of research into behavioral finance,” Mr. Benartzi said. “It was quite entertaining. Now we have to take it to the next level [and do something with the research]. Otherwise, why bother?”
Mr. Benartzi, 43, is widely recognized for his ground-breaking Save More Tomorrow program, which he developed with Richard Thaler of the University of Chicago.
The program makes use of what's called “present bias.” Mr. Benartzi and Mr. Thaler realized that people would consider opportunities to save more in the future more attractive than opportunities in the present. In what's known now as auto-escalation, employees commit ahead of time to save more of their paychecks after they get raises.
Millions of workers now have access to plans with the auto-escalation feature, which are especially common at large companies. After Mr. Benartzi testified on the topic, Congress passed incentives in the Pension Protection Act of 2006 for companies to use auto-escalation.
“It broadened people's horizons,” said David Wray, president of the Profit Sharing/401k Council of America. “Before that, people didn't think about changing people's savings rates with plan design.”
When Allianz Global Investors, the $2 trillion asset management division of Allianz SE, wanted to establish a behavioral-finance center after the financial crisis, Mr. Benartzi was a natural choice to be the chief thinker, said Cathy Smith, the center's co-director. The center's mission is to connect financial advisers and other clients of Allianz — not to mention policymakers — with ideas from academia.
“After 2008, there was a lot of feeling that human behavior hadn't been taken into account,” Ms. Smith said of Allianz's motivations for starting the center.
The center, which was founded in 2009, has a staff of four and an advisory board of six academics. Ms. Smith called Mr. Benartzi's ability to move fluidly between the worlds of industry and academia unique.
After working on a behavioral-audit tool to assess 401(k) plans, he's now leading the center as it looks at the question of what people should do with their money after they retire.
“It's a perfect place to try and solve another fascinating problem,” he said. “Once you've retired, what do you do with your money?”
The position with Allianz gives Mr. Benartzi a larger podium, and he recognizes that he may encounter conflicts of interest by embracing such a role within the financial services industry. He mentioned, for instance, the payday lending that some large companies engage in and which is often criticized by academics and activists.
“You just have to decide what you think is right, and that's the only thing I'll support,” he said.
