CIO: Can you give us an example of where plan sponsors aren’t
getting their message across and perhaps undermining their
own hard work?
DeMoss: Customized investments aren’t promoted enough by
the plan sponsors who are using them. A lot of larger plan sponsors have built custom target-date funds or white-label portfolios
that are significantly less expensive than what their participants
could get anywhere else, and that a smaller employer wouldn’t be
able to put together at all. They’re a higher-quality product, too,
and we’ve found that participants really appreciate that. But you
need to be telling them about that, and reminding them of the
ongoing value of your plan, from the get-go—especially if you’re
trying to get participants to stay in your plan during retirement,
which most plan sponsors are these days. Then, when participants get into retirement, they understand that rolling over to a
higher cost IRA may not be the best idea.
CIO: How are you getting all these messages out to plan
Jenkins: We’ve published some of our findings, of course, but in
terms of working with individual plan sponsors, we get a lot of
demand after speaking at conferences. Once a sponsor has heard
us speak, they’ll sometimes come to us afterward and ask for
help with a particular project. Maybe they’re planning a re-en-rollment or an overhaul of their investment menu. Whatever the
case, we’re happy to do it. This isn’t a revenue-generating service
for us. We’ll conduct what we call a “Word Lab” with them. We
spend about half a day with the sponsor, study their participant
materials and website, train their staff on the right and wrong
things to look for in communications, and teach them the principles we learned in our research. When we leave, they are better
equipped to make these decisions on their own.
CIO: Tell us a little bit about how you conduct your studies.
DeMoss: We start out by doing a set of in-depth interviews with
plan sponsors and consultants to figure out what challenges
they’re facing. During this phase of the process, we’re also looking to determine what language is being used by the financial services industry at that time, so that we know we’re current. Next,
we conduct three separate focus groups in which our researchers measure investors’ emotional responses to words using an
instant dial-response technology. We’re not asking, “Do you like
this or not?” Rather, we’re asking, “How do you feel about that?”
We do these in three different cities, each with different demographics. Each focus group is generally about three and a half
hours long, and there are about 30 people in each one. Finally,
we do an 800-person survey to validate what we found in those
three separate dial sessions.
CIO: Does your research have equal applicability to plan sponsors of all sizes? What about defined benefit plans?
Jenkins: Many of the key tenets of this research are rooted in
human psychology and apply no matter the size of plan. As for
defined benefit plans, we did a Word Lab session for a very large
client that operates both a defined benefit plan and a defined
contribution plan, and their defined benefit team felt they got as
much out of it as the defined contribution team. They were undertaking a campaign to get their participants to appreciate the value
of having a defined benefit plan, which of course is expensive and
a huge liability for the employer. Nonetheless, they’re sometimes
underappreciated; participants don’t know what they’re worth.
CIO: Using language that results in more informed plan participants obviously has benefits for them. What are some of the
benefits to plan sponsors?
DeMoss: We mentioned earlier the idea of keeping retirees in the
plan, which helps to maximize plan assets and bargaining power
with vendors. Using the right words also provides clarity to participants, which leads to confidence. They’re confident about
themselves, they’re confident about their organization, and they
feel better. People who feel like that are more likely to stay on
the job, which can help reduce turnover costs. They also are less
likely to be worried about their finances, more likely to be able to
retire on schedule and, probably, more productive.
CIO: Where do you see your work heading next? And is there
anything you can tell us about what you’re working on right now?
DeMoss: We have a study underway in which we’re focusing on
larger employers, which is important because we find that participants working for large organizations have different and higher
expectations of their employers and their retirement plans than
participants working for small employers. We’re trying to uncover
those differences, and we’ve already found a few, including how
participants think about costs. We’re finding that they do not fully
Key words to use when
communicating with participants
When it comes to the costs
of investing, what kind of fee
arrangement do you prefer?
One that is...
• 58% Straightforward
• 23% Clear
• 20% Transparent
Which is more
important to you
• 85% Financial
• 15% Financial