Want to Change 401(k) Participant Behavior? Start With Their Beliefs

Changing 401(k) saving behavior could take decades.
Changing 401(k) saving behavior could take decades.

A morning session at the GRP Advisor Alliance 2016 Industry Leaders Conference in Haines, Alaska on Sunday centered on financial wellness and what it will really take to change 401(k) participant behavior, as well as the investing public in general.

Moderated by GRP CEO and founder Bill Chetney, the session featured industry consultant and former president of Transamerica Retirement Solutions Stig Nybo, who described the Saving Re-Imagined initiative he now heads.

“There are a number of different ‘camps’ that the initiative falls under, and financial literacy and behavioral finance certainly apply, but it’s really about changing a belief system, rather than trying to make them smarter at investing,” Nybo explained.

He noted that it has to do with the ongoing battle between one’s present self versus their future self. Retirement planning requires a sacrifice for something that yields no immediate benefit, therefore it takes a backseat to other more pressing needs.

“Buying an iPhone is fun, retirement planning is not,” Nybo added. “We have to find some sort of immediate benefit to incentivize the public to save. We feel that the reduced anxiety that accompanies a plan can act as that immediate benefit.”

Noting that he’s not trying to “boil the ocean, he emphasized that Savings Re-imagined is limited in scope.

“When we get too broad is when we begin to fail. There are so many industry initiatives currently surrounding financial wellness and education, but not so much around financial beliefs, which is what we’re targeting.”

The demographic he plans to reach ranges from age 21 to age 39, which he calls the beginning and mid-point of one’s career and a cohort that shows characteristics of wanting to communicate with others who can then act as a “megaphone” for the project.”

“We are constantly asked about how we’ll measure success,” Nybo concludes. “It will be in decades, not years. Because it’s behavioral, it will take some time. Look at the ‘Keep America Beautiful Campaign.’ From 1969 to 2009 they were able to reduce littering by 61 percent, but it took 40 years. When they initially asked people why they littered, they quickly realized it was a belief system, so they changed it. It’s the same with ‘Smoking is Ugly’ and ‘Only You Can Prevent Forest Fires.” They’ve gone on for decades.”

Saving Re-Imagined currently claims 30 financial services firms as members.

John Sullivan
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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.

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