A 401k Blockbuster
You can watch a movie on any small-screen you happen across. Going to the theater makes it an experience.
The mega-size, surround sound, airy and aromatic space with overstuffed leather recliners and (often) a waitstaff has moviegoers more immersed and engaged, and therefore willing to allocate more money.
It’s pleasant, and why should retirement saving be different? It’s something Joe DeNoyior and his team hit upon some time ago.
The high-profile former NAPA president says a key to success is making the 401k more of an experience than a benefit.
More specifically, he says, encourage participants to be engaged, know their “score,” and understand what it takes to achieve positive participant outcomes (hint: save more).
The first part, engagement, should focus on three questions, according to DeNoyior, managing partner with McLean, Virginia-based Washington Financial Group:
- Should I enroll? (Addressed through auto features)
- How much should I save? (An issue on which to concentrate)
- Where should I invest? (Addressed through default features)
“Then spend the time to encourage and celebrate employees who focus on No. 2,” he says. “Hold raffles and giveaways for those that take an online quiz, for instance. Help make them more confident in their decision-making. It’s education with action, because one without the other does little. We can lead them to the water, but they must ultimately decide how much to drink.”
When making recommendations to plan sponsors, DeNoyior and his team set expectations based on actions, and then measure the success of those actions by outcomes. It’s a bit counterintuitive, but it works.
Here’s an example:
The firm currently has a plan sponsor client that’s been with it for a year. The plan already utilized most auto-features (enrollment, escalation, etc.) and enjoys a high participation rate and solid due diligence process.
What they wanted was more employee engagement.
It started with lunch-and-learns and they (later) added financial wellness benefits. The aforementioned raffles and prize giveaways were a big part of the incentives to act. The first step was an online financial assessment with a chance at an Apple watch. Fully 79 percent of the company’s employees took the assessment.
“Who doesn’t want an Apple watch?” DeNoyior rhetorically (and rightly) asks. “And 87 percent of that group completed step two. Their incentive? A paid day off with a spa treatment.”
The result of these efforts not only to save, but to be engaged about how much and if it’s enough, added 2 percent to average deferral rates, and increased their retirement income score by 15 points, according to a key metric measured by the firm.
“I have a laser-like focus on helping our clients’ employees do well,” DeNoyior concluded. “I lead a team that holds this same value. We take complex issues and explain them in terms that drive results. We measure our effectiveness and immediately share with our clients. It’s a process we systematize with them as early in the relationship as possible.”
Joe DeNoyior is managing partner with McLean, Virginia-based Washington Financial Group.