Vanguard is leveraging its behavioral research and the $950 billion in defined contribution assets it manages (seriously) in its latest retirement-related technology release.
The Pennsylvania-based investment behemoth has a new participant web portal that presents plan participants with two key metrics and a recommendation:
• Account balance: Shows participants how much money they have saved for retirement today.
• Retirement readiness indicator: Leverages integrated analytical technology to measure progress towards goals such as an estimate of future monthly income.
• Next steps: Provides participants with a personalized nudge in the right direction by suggesting the next best action to get on track—and stay the course.
The tool aggregates data, including current plan savings, Social Security, and other outside assets. The tool uses assumptions, such as future contributions and forecasts from the Vanguard Capital Markets Model, to project how savings will grow over time.
It also applies the 4 percent withdrawal rule, and participants are able to see an estimate of their future monthly retirement income—refreshed upon each login.
“The Retirement Readiness Tool also makes it easy for participants to refine their estimates by changing different variables, and offers the option of running helpful ‘what-if’ scenarios,” Vanguard notes. “For example, participants can see how their retirement income might change based on different retirement ages.”
In addition to the new online experience, Vanguard’s Personalized Participant Journeys represent “the next evolution in participant outreach and communication.”
Also rooted in behavioral finance, Personalized Participant Journeys utilize a test-and-learn approach and big data analytics to deliver “the right message at the right time to encourage a participant to take his or her next best action.”
Vanguard claims it’s seen wide adoption by plan sponsors and positive participant outcomes, with 99 percent of Vanguard plan sponsors adopting Personalized Participant Journeys. In the past year, more than 283,000 participants have taken action “to help improve their retirement readiness, such as enrolling in the plan, increasing savings rates, and updating beneficiaries.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
