Taco trucks. Hammocks. Keg-o-rators.
Not exactly the words you associate with increasing 401k participation, but advisor Jason Chepenik says it’s why advisors are missing opportunities.
The Orlando-based head of Chepenik Financial says that because retirement plan jargon is “overwhelming and scary” to participants, advisors need to find approaches that ease the concepts into conversation in a palpable manner.
To use his analogy, it’s like chopping up medicine and mixing it into food to get kids to eat it.
“I am a creative soul versus a stock picker,” says Chepenik, who has mastered incorporating unique hooks to get companies and their employees enrolled in 401k plans. “My firm’s approach is critically important to what we do. Not only does it support employee engagement, but it’s fun and makes my team happy, as well.”
One of his favorite go-tos is hosting a “retirement” party for only those employees who have enrolled in the company plan, complete with hot dogs, popcorn and games. He says the activity alone is enough to make those who didn’t enroll envious. In turn, he uses that to encourage them to sign up.
He’s morphing that idea into the “Taco Bout Retirement Truck.” He partnered with a local food truck, wrapped it in a colorful design and is taking it on the road to multiple employer client locations.
“If you have signed up for the company 401k plan, you get a free taco,” he says.
If you didn’t, you only get rice and beans. Because without retirement savings, he says wryly, you will be “livin’ la vida broke-a.”
Chepenik estimates his investment in the taco truck was a few thousand dollars, with some costs potentially shared with clients.
He’s also staged a hammock at a company’s entrance with a sign that reads, “Shhh…I’m practicing my retirement.” Only those who have deferred a certain percentage get a 15-minute turn in the hammock.
Why Offbeat is Important
An offbeat enrollment strategy ticks a number of boxes, Chepenik adds. It allows the plan sponsor to get all the credit because it’s agnostic and not tied to specific funds or recordkeepers. Secondly, the activities draw attention and employees don’t want to miss out on what their peers are experiencing.
Plus, incorporating “fun” elements make participants feel at ease, and as importantly, more receptive to learning about the plan.
“I match a retirement plan with the company culture and engage people by helping them connect the dots,” explains Chepenik.
He mentions another idea that’s percolating and could involve a client’s already in-house Keg-o-Rator: creating a special 401k edition of beer that would be a perfect enrollment lure in this company’s hip environment.
“It’s important to find ways that help my clients see the plan come alive,” he adds.
90 Percent Participation Without Matching
David Ramirez, chief investment officer with San Francisco firm ForUsAll, has a double whammy when it comes to enticing employees to join a plan. Not only does he face the same uphill battle as most advisors in getting participants on board, he works primarily with hard-to-reach, high-turnover populations, such as hotel, restaurant and property management workers.
So, how is he managing to get nine out of 10 employees enrolled in plans with an average deferral rate of 8 percent (before any company match)?
It starts with text messaging.
“Over 90 percent of text messages are read in the first three minutes after they are received,” says Ramirez. “They are ridiculously effective.”
Case in point: a large hotel chain he started working with felt their employees weren’t participating in the retirement plan because they didn’t have enough money to invest.
Then, a new human resources director arrived. Despite the “nothing we can do about it” response from colleagues, something interesting happened when she and Ramirez started a non-traditional enrollment process, using text messaging and the like.
In three weeks, they increased plan participation from 7 percent to 73 percent, with an average deferral rate of 6.5 percent.
The communications don’t just begin appearing on employee phones.
First, there’s a retirement party kickoff at company locations, complete with a “401cake,” that sets the tone for the next wave of communications.
From there, Ramirez leverages employees’ mobile devices, even customizing messages in different languages depending on the workforce demographics.
His firm developed a virtual advisor they call “Dave,” who arrives via text or email and helpfully explains to the recipient the “what” and “how” of 401k enrollment in about 90 seconds.
Ramirez even used Dave to ask employees at a 500-person company why they hadn’t joined the 401k plan yet. A combined 59 percent cited either they were too busy or it was too much hassle—which underscored the need to make signing up as simple as possible.
“Our text communication reaches participants wherever they are and is specially designed to let them implement it then and there when they are motivated,” Ramirez says.
He estimates they have three to four touch points per employee with his approach, focusing on several key elements.
“There needs to be an accessibility in terms of employees knowing the plans exist,” he explains. “Then, we use Dave to help them better understand and implement the sign-up process. Finally, there must be a strong plan design element, including commitments to higher default rates and auto-escalation.”
The obvious enticements, such as a company match or auto enrollment, aren’t always as alluring as some would think.
Ramirez says most of his clients don’t offer a company 401k contribution match, because doing so “pales in comparison to effectively communicating with employees.” While it might help, he says if employees aren’t excited about it, it will have minimal impact.
Chepenik does acknowledges that “a rich company match can help attract talent.” But he thinks it’s more effective if a company instead makes a $50 contribution to an individual’s retirement plan after they’ve attended X number of classes on key retirement topics, such as financial wellness.
When not communicated effectively, Ramirez says auto-enrollment can also come across as “disempowering,” because it represents a missed opportunity to give participants ownership in the decision by engaging them with relevant and thoughtful communication.
The Personal Approach
Joseph Trybula, vice president of advisory services at Diversified Financial Advisors, offers another perspective on what motivates participants.
With an industry trending toward default programs, Trybula says participants don’t act on their own because it’s become a depersonalizing experience.
Not surprisingly, his firm has seen success in a more personal approach, starting with one-on-one enrollment sessions.
He used the strength of the one-on-one to take a client from 40 percent participation to 89 percent and from an average NHCE 3 percent deferral to 5.2—and without offering a company match.
“People want to be talked to as a human. They want to feel special,” he says. “And yes, it’s a huge time commitment for advisors, but that’s the business we are in. We have learned that if you take the time up front, you spend much less time on the backside serving clients.”
While increasing plan enrollment brings tangible metrics, it also can have a positive influence on company culture.
Ramirez points to his clients’ high turnover rates. Employees will leave to earn 50 cents more an hour somewhere else.
But when a retirement plan is properly rolled out, it can change the dynamic of a company overnight.
Ramirez says that a great, low-cost 401k plan helps show an employee that he or she is not just another number and that the company cares about their future. He’s interviewed employees about the benefits of being in a plan and says they don’t talk about what’s going to happen in 30 years when they retire.
“They say things like, ‘I love this because it will help me and my family.’ They see the immediate benefit and also feel like they are being a role model to their kids.”
This feel-good response has a ripple effect throughout the workforce. Ramirez says employees start talking about the experience, demand builds and a “glow” is created.
“A beautiful thing happens: the goodwill is reflected back on the company and it becomes like a family, which goes a long way in retaining employees.”
What to Avoid
A consistent theme emerged regarding the most unnecessary and ineffective enrollment techniques.
“Blow up plan education sessions and start all over again” is the blunt advice from Chepenik. “Stop with the discussions of stocks and bonds and 3(21) versus 3(38). Participants will never wake up in retirement and say, ‘Thank you to my 3(38) advisor.’”
Attendance rates at group education sessions are “abysmal” for Ramirez’s hard-to-reach populations. He says that those who do show up are the ones who are already more engaged in retirement matters.
“The big financial questions employees face happen every day, not just once a quarter. Advisors need to be more accessible, including evenings, when decision-making with a spouse is more likely to occur.”
Sending a packet of enrollment paperwork and asking participants to sign and return is a non-starter for Trybula, because it lacks that personal connection he feels helps lead to higher enrollment and increased contributions.
Moving the Needle
Incentives are obviously important, and Trybula notes that the more financial tools and knowledge you can give employees, the more likely they are to be successful.
Some advisors may be satisfied with traditional approaches, but Ramirez says, if he can get nine out of 10 employees enrolled in his hard-to-reach target populations, it should encourage advisors to try something different.
“It’s socially critical and absolutely possible. Advisors need to help close the retirement savings gap,” he stresses. “If you do this, you are truly differentiating yourself in the marketplace and setting yourself apart from others.”
However, advisors should understand that incentives don’t stop after one creative outing, according to Chepenik.
“It’s not one and done. It’s a constant push.”