In 2008, Americans voted in record numbers, with millions submitting early ballots and others standing in lines that snaked around the block—sometimes in pouring rain. Fast-forward to 2010. Voter turnout for the recent mid-term primaries was the lowest of any mid-term primary season in U.S. history, with the exception of 2006. Young voters were the most disaffected. Voter turnout among 18- to 20-year-olds was down a full 60%.
So why have American youth become disengaged from politics? They may have put Obama into office, but since 2008 the Obama administration has given them little or no reason to stay engaged. There has been no youth agenda and no other palpable change—at least not on a scale that would appeal to gen Ys. When your time, effort and involvement lead to little change or practical outcome, why bother? Why vote if it makes no difference?
The same principle applies to members of capital accumulation plans (CAPs). After the unprecedented downturn in 2008, many members felt a profound loss of control over their personal finances. As a result, member engagement, which was never high to start with, took a dramatic turn for the worse. This disengagement comes across loud and clear in Benefits Canada’s fifth annual Survey of CAP Members. In 2010, only 35% of CAP members bothered to review their statements—a drop of more than 50% since 2008. And the number of members with a formal financial plan fell to 26%—down from 46% in 2007.
Conventional wisdom suggests that shifting responsibility to members makes a lot of sense—more responsibility, more engagement. This was a key impetus for the introduction of CAPs in the ’90s. But what happens if responsibility is handed over at a time when members feel they have little influence over their own destiny? It’s hard to find the motivation needed to choose and monitor your investment options when a new economic calamity (such as the European debt crisis) could suddenly yank the rug right out from under you.
So where does this leave plan sponsors? Do you continue to lob communications missives at your members in the hope that something will stick while you wait for them to regain confidence in investment markets and their own investment abilities?
Clearly, there’s a huge potential for spinning your wheels—and wasting a whole lot of time and money. But that doesn’t mean you should give up trying to engage members. You just need to be smarter about it.
Here are three steps you can take to help get your members back into the game:
1. Help them understand what they can control. Taking full advantage of employer matching, for example, will provide an immediate (and hefty) return on their investment. Diversifying their holdings will help reduce risk.
2. Focus on the long-term consequences of inaction. For example, show members how much they’re leaving on the table if they don’t take advantage of employer matching and the impact this might have on their future financial security.
3. Mine and manage your data. Send out short, targeted, action-oriented messages addressing specific behaviours (such as failure to make an active investment choice), opportunities (such as redirecting pre-tax bonuses) and age- or service-related milestones.
Plan sponsors can’t afford to wait for members to regain their confidence. You need to help your members adapt to the new realities now.