Retirement Plans Still Lag in Digital Experience: J.D. Power
Today’s digital channels, from refreshed websites to modernized mobile apps, present opportunities for financial institutions and firms to support clients outside of in-person interactions. Yet, the retirement planning industry is failing to keep up with its digital experience, finds J.D. Power’s latest study.
The 2024 U.S. Retirement Plan Digital Study, released today, found that most retirement planning digital experiences are falling behind in user satisfaction. Just 21% of retirement websites and mobile apps are meeting client’s expectations.
Furthermore, using a digital experience hierarchy that assesses retirement plan website and mobile app experiences, J.D. Power found that 21% of customers’ digital experiences failed to meet the basic criteria for a foundational experience and only 21% have digital experiences that are classified as valuable.
The firm’s grading measured retirement plan website and mobile app experiences based on specific elements that define three performance levels: foundational, functional and valuable. Foundational experiences focus on basic design, security and key information access; functional experiences center on ease of use and navigation; and valuable experiences relate to creating more personalization and delivering these experiences proactively.
The setback presents a critical issue for the industry, as more participants and clients rely on digital tools and features to help bolster engagement and plan satisfaction. Research has shown that more clients value digitalization in their finances—a study by Ernst & Young found that 86% of clients surveyed described their primary financial provider’s aptitude to offer a “seamless cross-channel experience” as important.
“Expectations for digital are heavily influenced by customers’ entire universe of digital experiences and plan providers have not kept pace with other sectors,” stated Craig Martin, managing director and global head of wealth and lending intelligence at J.D. Power. “Falling behind on digital can have very real consequences for engaging and influencing perceptions and behaviors.”
Still, some institutions are optimizing digital channels to further support their clients, resulting in high digital satisfaction. J.D. Power ranked the top three firms with the highest digital satisfaction, measured across four factors: information/content; navigation; speed; and visual appeal.
Charles Schwab ranked the highest in retirement plan digital satisfaction, with a score of 753 on a 1,000-point scale. Nationwide placed second at 739, followed by Fidelity Investments in third place at 734.
Read on for the top findings fielded in J.D. Power’s study, along with why the retirement industry has had trouble elevating its digital experience.
Slow rise in retirement plan digitalization
Despite its low ranking, J.D. Power found that overall satisfaction with retirement plan digital experiences grew to 703, an 18-point increase from 2023.
“Retirement firms have started to increase their investments in technology but there is a meaningful difference still.”
Craig Martin, J.D. Power
However, it’s position is still poor compared to other service industries—including insurance, automative finance, utilities, and banking—when considering ease of use and ability to find information. Other critical gaps including ease of finding information, tools, and other usage challenges, J.D. Power reports.
Martin explains his reasoning on why the retirement planning industry falls behind in digitalization, compared to resembling industries like insurance and banking. One factor is the prioritization these industries have made to enable technology early on, he highlights in comments to 401(k) Specialist.
“Banks and insurers were early in making substantial investments in technology in part because of the highly competitive nature of the industry,” he said. “Retirement firms have started to increase their investments in technology but there is a meaningful difference still. Related to that, large financial institutions can often leverage learnings and best practices from other parts of the organization to help improve the experience across the enterprise.”
Another factor is the nature of the relationships between professionals and clients. Whereas individual clients seek out banking services themselves, employer-sponsored retirement plan participants work with financial planners chosen by their company. “Retirement relationships tend to have less activity and engagement when compared to something like banking,” he further explained. “Additionally, when talking about an employer-provided retirement plan, the end consumer doesn’t have direct decisionmaking power on who they work with so there is less market pressure created by competition.”
Strong digital experience drives business growth
J.D. Power’s study shows that customers are nearly twice as likely to keep assets with their current provider in the event of a job change if that provider offers a valuable digital experience, and 40% are more likely to roll money over from other retirement accounts if they have a great digital experience. Furthermore, a top-tier digital experience increases the likelihood of asset retention by 97%, versus a poor digital experience among consumers.
“When clients have a poor digital experience, it has many downstream effects on the cost to serve,” Martin said. “If I lack confidence in that channel, I’m more likely to call a much more expensive service channel.”
Not only could a lack of digitalization curtail client satisfaction, but it can also eventually dwindle company growth. Plus, when clients are disengaged, it disrupts openings for business expansions into other marketplaces, added Martin.
“Financial wellness has become a critical focus for many retirement plan providers striving to be more than just a basic product provider,” he stated. “Customers who are digitally disengaged are very unlikely to recognize or see value in these efforts, which means a lot of wasted time and resources—as well as reduced business expansion opportunities.”
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