When do you want to retire? What level of income will you need? How do you feel toward investment risk? How do you select from the spectrum of funds available to meet your goal? These questions require answers in order to be properly financially prepared for retirement and plan sponsors admit that plan members are confused.

Answering those questions is an extremely difficult task for anyone to do, said Peter Arnold, Buck Consultants’ national practice leader, investment consulting, at a seminar in Toronto on Wednesday. He added that plan sponsors need to communicate effectively so that their members meet their retirement savings goals.

“Eighty-two percent of us think we are doing a good job [of educating members on investment options],” Arnold said at the seminar, which discussed results of the company’s CAPs and Communication Survey. “But when we asked you what your members think, things get contradictory.”

According the survey, 74% of respondents thought their members were confused over investment options offered to them and 68% thought there wasn’t enough investment education. Member understanding and satisfaction results from the 2008 survey are similar to those of 2004.

“It’s like putting a square peg in a round hole,” he said about sponsors regurgitating the same investment information in the same way, year after year. “Plan members aren’t getting it. We need to make communication strategies that suit the needs of the members, not everyone is financially literate.”

Communications Trends

  • Flyers with tear-off, postage-paid response cards typically yield a 15% to 20% response rate
  • Other ways of communicating with members: focus groups, face-to-face seminars
  • Complicated booklets have become an icon of the past

So, how is this done? David McCullagh, a senior communication consultant also from Buck Consultants, said sponsors need to do stakeholder analysis. “I think the message is being delivered. We just don’t know if it’s being received or understood,” he said. “Generic tools are not suitable for all members. Most people need a little more.”

For instance, 42% of DC participants in a John Handcock survey said they have little or no investment knowledge. Approximately 50% said they have the skills to manage their portfolios but they would rather spend their time doing other things.

“You need to recognize the limitations of your members and adapt to it,” McCullagh said, again reinforcing the importance of stakeholder analysis. “Customization is key. You can’t just lead them to water, you have to show them how to drink it if you want them to get excited and involved in their DC plan.”

To comment on this story, email april.scottclarke@rci.rogers.com.

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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