Christina: Most retirement committees spend a tremendous amount of time thinking through and analyzing the right investments to put on their defined contribution plan and leave their participant communication and engagement decisions with their administrative counterparts, when in fact, these two decisions should be made together, and with equal importance.
According to the 13th annual PIMCO DC consulting study, the number one top priority among clients in the small market was to improve participant retirement education. And that’s above priorities like minimizing fiduciary liability, reviewing HSAs, and evaluating plan costs. This is likely due to several contributing factors. First, a large retiring workforce. Second, a growing focus on wellness, both health and financial. And then lastly, quite honestly, it’s a fear of not doing enough, not communicating enough, to avoid a potential lawsuit.
Successful plans employ a combination of effective plan design and engaging participant communications. They’re like two pieces of the same puzzle. One is meant to promote better investment behavior, and overcome inertia for the disengaged, while the other is meant to educate the engaged to help them take full advantage of the plan and all of its features.
Here are some quick tips that plan consultants, advisors, and sponsors can take in order to help participants take full advantage of their plans. Keep it simple. Just changing the words on the page can go a long way. The average participant scores 61 in financial literacy, so it’s important that we take our complex topics and boil it down to a simpler narrative so everyone can understand. Second, get the success metrics back from the record-keeper. They can tell you what participants respond to the most, and you should take these insights and embed it in your communication plan that you create every year. And lastly, it’s a little-known industry secret: work with your fund managers, like PIMCO. More likely than not, they have communication resources and tools available to their clients, especially their QDIA clients, and it’s generally at no additional cost.
PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2019, PIMCO.