Data and Research September 19, 2022

Satisfaction With Retirement Plan Digital Experience Falls

Retirement plan investors are ‘under a great deal of financial stress,’ and when they turn to their plan’s website or app, they are not finding what they need.

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Retirement investors feel their financial health is deteriorating, and many are concerned about their investments—but when they turn to their plan’s website or app for help, they are not finding what they need, a recent survey by the firm J.D. Power found.

Overall satisfaction is down 12 points (on a 1,000-point scale) this year, as 53% of retirement plan investors are now classified as financially unhealthy and 63% said they have challenges managing their accounts digitally, according to the 2022 U.S. Retirement Plan Digital Experience Study. Based on responses from more than 7,000 retirement plan participants and conducted in May and June, the study measures customer satisfaction across four factors: information and content; navigation; speed; and visual appeal.

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“Retirement investors are under a great deal of financial stress right now and they are looking to their plan’s websites and apps for information and guidance,” said Mike Foy, senior director and head of wealth intelligence at J.D. Power, in a statement. “Unfortunately, many are not finding what they need and end up having to call customer service for help. This is a moment-of-truth opportunity for plan providers. When they get the digital experience right, they see a very significant lift in the likelihood to grow and retain participant assets long after they have left their current employer.”

During the past year, the percentage of financially healthy retirement investors has dropped to 47% from 60%, with 28% now falling into the financially vulnerable category, the study found. Overall satisfaction with retirement plan digital experience has fallen 12 points, similar to the decline seen in financial health.

Strong digital performance is highly correlated with the acquisition and retention of retirement investor assets—highlighting the importance of how a good digital experience can help retain customers, the study says. Among top digital performers, 50% of investors said they “definitely will” keep their assets with their current provider in the event of a job change, versus 17% of investors with low-performing firms. With average job tenure for Millennials and members of Generation Z now hovering below three years, retaining investors through employment changes has become a top priority for retirement plans, the study adds.

Overall customer satisfaction with retirement plan digital experience rises 191 points to 671 when participants can complete tasks by themselves on their plan’s website or mobile app, the study says. However, just 37% of investors said they can manage their accounts digitally without contacting customer service.

According to the study, overall customer satisfaction rises 178 points when investors believe the retirement plan websites and apps offer proactive guidance and help, yet just 22% of firms evaluated are meeting this performance indicator.

Bank of America (including Merrill) and Charles Schwab rank highest in retirement plan digital satisfaction, in a tie, with a score of 704. Prudential Financial ranks third with a score of 696. Fidelity investments came in fourth with a score of 690, followed by T. Rowe Price with a score of 689. The industry average is 663.

Opinions September 19, 2022

Personalization and the DC System

A typical platform might use age and salary to generate investment recommendations. What additional factors could lead to more customized solutions?

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Technology and social media increasingly blur the lines between work and home, personal and professional and employers will need to be mindful of the implications of this when creating and communicating benefits programs. Specifically, defined contribution plan sponsors will need to stay abreast of rapidly evolving trends and developments in the personalization space in order to keep their plans tailored, relevant and appealing.

 

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Conversations about personalization are frequently tied to the growing focus on retirement income and rethinking investment menus to account for both the earning/accumulation and spending/decumulation phases of life. An announcement from PIMCO about its annual consultant survey notes, “A generational shift in how Americans plan for retirement is creating demand for a more dynamic approach to saving and technological advances have made solutions tailored to plan participants’ specific circumstances much more accessible to the broader public.”

 

Plans may want to consider taking a fresh look at their investment lineup through the customization lens and discuss it with their investment consultant or adviser and recordkeeper. Are the offerings appropriate for the workforce demographics and any stated goal of keeping retiree assets in plan? Are there new ways that the investment menu might be updated or structured to consider additional personalization factors? How are current target-date fund and/or managed account offerings allowing for engagement and personalization, and how might these evolve?

 

A typical platform might use age and salary to generate investment recommendations. However, additional factors that could lead to more customized solutions include:

  • Marital status;
  • Gender;
  • Number of dependents;
  • Health status;
  • Homeownership;
  • Debt, including types of debt such as credit cards and student loans;
  • Access to a pension (self or spouse);
  • Other liquid and illiquid assets;
  • Any expected inheritance(s);
  • Insurance coverage, including health, life, long-term care and disability insurance;
  • Expected retirement age, if known; and
  • Other workplace savings (e.g., HSAs, emergency savings).

 

As a holistic financial wellness approach increasingly takes hold in how benefits are structured and communicated, this approach can inform and gain from personalization features that customize both the content offerings and the manner in which information is delivered to individuals.

 

The rising demand for personalized data, experiences and programs stems in part from a society that is increasingly responsive to personal tastes and preferences based on demographic data and previous interactions with apps and websites. Think of the suggestions that appear without prompting on TV streaming services or the recommendations that pop up in shopping apps. Individuals are increasingly expecting this type of experience across the board, not just for entertainment but also for their finances and in their workplace. Tailored content and delivery may have the added benefit of keeping people engaged even as attention spans become ever shorter, and could also help combat the known phenomenon of decision paralysis, which can occur when people are presented with too many choices or demands.

 

While plan sponsors may not have the resources to dedicate to personalization that Amazon does, they can start having conversations about it internally and with their service providers. This may require breaking down internal silos and involving members of not only human resources and finance but also IT, communications and the diversity, equity and inclusion team in these discussions.

 

Some questions to consider might include:

  • What feedback have we had on our retirement plan in the past in terms of user experience and how can it inform the path forward?
  • What data do we have about what our workers need and how and where they are currently accessing plan information?
  • What are our service providers and similarly sized plans offering, considering and seeing related to benefits personalization?
  • What do our workforce projections look like for the coming five to 10 years?
  • How might this planning tie into our strategy for broad offerings such as emergency and college savings programs?

 

The key is to not wait until a perfect solution emerges. Rather, start embedding customization options where possible and aligning them with goals and overall strategy. For an organization committed to boosting its equity and inclusion practices, this might be as straightforward as starting with offering plan information in multiple languages, ensuring that sites and apps used to communicate meet accessibility best practices and ensuring that plan and benefits websites are mobile-responsive so employees can have an optimal user experience whether at a computer or on a cell phone.

 

An ecosystem of trust built on transparency and clear goals and processes must underpin this evolution. Participants must trust those to whom they are providing personal information, those who are selecting and managing the investment offerings in their retirement plan and those who may be offering them advice. Plan sponsors must trust the cybersecurity protocols and data security oversight of their recordkeeper and the recommendations and insights of their investment consultants and advisers.

 

The Defined Contribution Institutional Investment Association Retirement Research Center is actively exploring personalization as one of its focus areas for this year, considering the intersections of generational and DEI focuses and the question, “How can personalization lead to greater financial wellness?” We look forward to sharing our findings with plan sponsors and the broader industry.

 

Pam Hess, Chartered Financial Analyst, is vice president of research and member engagement at DCIIA RRC.

This feature is to provide general information only, does not constitute legal or tax advice and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Institutional Shareholder Services Inc. (ISS) or its affiliates.

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