Close Close

Retirement Planning > Retirement Investing

Retirement planning at the water cooler

Your article was successfully shared with the contacts you provided.

Financial institutions are often failing to connect with those who may need retirement planning advice and solutions, particularly via the workplace and among the less affluent, a survey by Deloitte’s Center for Financial Services revealed.

The survey of nearly 4,500 consumers from a wide range of age and income groups found this failure to communicate to be one of five barriers preventing life insurance and annuity companies from more effectively reaching prospects when it comes to retirement planning.

(Our last article on this survey focused on the first of the five barriers — conflicting priorities. Future blogs over the next few weeks will address lack of product awareness, mistrust of financial institutions, and a “do it myself” mentality among consumers.)

See: Revealed: The 5 biggest barriers to retirement planning

Many retirement planning prospects — even those who might be considered more lucrative from an asset-gathering perspective — are not being actively engaged by financial services providers. Six in 10 surveyed by Deloitte say they have not had interactions in the past two years with any financial institution about their retirement savings and income needs, whether via in-person meetings, phone conversations, e-mail communications or seminars. This disengaged percentage rose to about three out of four among those 45 and younger.

Even half of the respondents between ages 56 and 64 — those presumably with the greatest need for assistance given their proximity to retirement — said no one had been in touch with them on this subject. And fewer than one in four with a 401(k) plan said they had been contacted by the plan provider to discuss their retirement needs.

Too much focus on the affluent market?

Not surprisingly, financial institutions appear to be concentrating most of their marketing efforts at the affluent segment. Deloitte’s survey confirmed that the higher one’s household income, the more likely respondents were to say they had been contacted by a financial institution about their retirement needs, particularly among those reporting household incomes above $200,000. That leaves large segments of the population underserved when it comes to retirement services.

Ideally, the workplace is a natural venue to communicate with the widest range of consumers about their retirement needs, given that for many Americans, a work-based 401(k) may be the only “plan” they have in place beyond Social Security to finance their retirement. Indeed, since their introduction in the 1970s, 401(k)s have radically altered the retirement landscape, putting more of the onus on individual savings while making the workplace one of the more important channels for retirement awareness and planning.

In fact, four in 10 between the ages of 26 and 45 surveyed by Deloitte cited affiliation with their employer as one of the reasons for choosing a financial institution to meet their retirement needs. However, it appears that financial services institutions have not been able to fully tap the potential of workplace marketing.

Deloitte’s survey found that nearly half of those with a 401(k) or some other workplace retirement plan were either not being offered retirement advice through their plan provider (28 percent) or didn’t know if such advice was even available (19 percent).

Meanwhile, 57 percent of respondents who were offered retirement advice through their plan provider did not take advantage of this opportunity. One in four said that the main reason why was because they didn’t need retirement planning advice. (We’ll deal with this particular barrier in a future column about the “do it myself” mentality among many consumers.) Nearly the same percentage said they already had their own financial planner. But about 20 percent said they didn’t feel they had the time for such consultations, while 10 percent do not trust the employer’s retirement advisor.

Changes promulgated by the Pension Protection Act of 2006 (PPA) have provided employers with some additional flexibility to offer investment advisory services to 401(k) plan participants. But significant restrictions remain under the statute and related regulations. As a consequence, many employers are concerned about incurring liabilities if they provide investment advice via their retirement plans.

One way to overcome the communications barrier in an economically feasible way might be to bolster workplace marketing efforts. The workplace already has set the stage for holistic financial planning, given the easy access to retirement accounts, life and health insurance, and other financial services delivered via employee benefit plans and funded by payroll deductions.

Progress has already been made in leveraging this channel by influencing savings behaviors through auto enrollment and default investment options in 401(k) plans. But there may be additional steps financial institutions can take to proactively reach more prospects via the workplace.

Many of the diagnostic tools offered through workplace marketing today require the consumer to take the initiative, typically through web-based retirement calculators that offer very broad investment option suggestions.

A more proactive alternative might be to offer holistic financial planning seminars for employees and their spouses. Plan participants are already offered information about retirement through a number of workplace channels — including on-site seminars — but our survey analysis suggests that many don’t take full advantage of this opportunity. One reason might be because such seminars often address retirement savings and income planning in a vacuum, while ignoring conflicting financial priorities.

For the long term, financial institutions and employer groups might strengthen this channel for service providers and consumers alike by seeking additional legislative and regulatory reforms giving plan providers more flexibility to address employee retirement needs, while also offering employers protection from potential liability.

In the next installment of this series, we’ll examine how financial institutions could overcome a third barrier discouraging or preventing many people from planning for retirement — a lack of awareness among consumers about a number of product options at their disposal, including some alarming results about annuities.

In the meantime, a full report on the survey results and their implications—“Meeting the Retirement Challenge: New Approaches and Solutions for the Financial Services Industry”—can be accessed with this link.

See also: