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To Improve Retirement Readiness, Retire Shame

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The financial planning industry has been saying this for decades… we are unprepared. On so many levels, people everywhere, particularly in America, are not thinking enough, saving enough, or understanding enough, about retirement.

Why is this subject so important? Because of the American dream. Investopedia defines the American Dream as “the belief that anyone, regardless of where they were born or what class they were born into, can attain their own version of success in a society where upward mobility is possible for everyone. The American Dream is achieved through sacrifice, risk-taking, and hard work, rather than by chance. ”

The Second Half of the American Dream

And then what? After the sacrifice, risk-taking and hard work, do you just die at your desk? No, the second half of the American dream is using the money that you’ve earned to have a great life without having to work so hard. America is a bit too young to understand this part. Perhaps, until now.

The industry has simplistically used a “precision calculator” to figure out a “number” that one must achieve to have the second half of the dream. However, the number is meaningless. Markets change, circumstances change, global pandemics happen, and these things disrupt the value of everything, and the relationship between everything. So why have so many companies followed suit? Because calculators are easy to develop, and those in power positions believe that by rationally making a mathematical case for change, a product will be sold. That would generally be true if finance were a rational subject. But it’s not. It’s emotional. And these calculators can backfire not only by lulling one into thinking the number is the answer, but worse, by triggering one of the most powerful — and dangerous — human emotions. Shame.

The Impact of Shame

Here is a scientific description of shame:

“We feel shame when we violate the social-norms we believe in. At such moments we feel humiliated, exposed and small and are unable to look another person straight in the eye. We want to sink into the ground and disappear.

Shame makes us direct our focus inward and view our entire self in a negative light. ”

-The Scientific Underpinnings and Impacts of Shame, Scientific American, August 9, 2019

In light of this, consider three things:

  1. The notion of a number is a social norm. And most people are violating it. Might that make us view ourselves in a negative light?
  2. If we view ourselves negatively, do we actively seek change, or do we try to avoid having the negative feeling?
  3. If we avoid the feeling, how can we possibly confront the issues around retirement readiness, or seek help, by putting ourselves into a situation where we will be forced to look someone in the eye and talk about or violation of a social norm?

These are very prickly, complicated and highly charged questions., but they go a long way toward explaining why we need a new approach to engagement at or near retirement.

The Antidote to Shame Is Empathy… and the Industry Lacks Empathy

Brene Brown, world recognized researcher, author and speaker has noted that shame is the most primitive human emotion, leading to a feeling of being unworthy of love and affection. She also notes that the way people are pulled out of the abyss of shame is through true empathy, which is the ability to truly understand and share the feelings of another. In her book “Dare To Lead”, Brene makes many helpful distinctions between empathy and sympathy, which are not the same and often confused, and also gives examples of empathy done well, and not. The bottom line is that empathy helps others realize that while they are experiencing shame, and a lack of worthiness, there is hope. She shapes empathy as a critical skill for leadership in the future, in essence, learning to be more human is essential for successful business and life.

So, where does that leave the retirement industry? With a pretty big gap in skill. If we are creating shame, we are forcing a large percentage of Americans to retreat from getting any advice or engaging as they should, and therefore not taking the actions that are in their best interests for the future. Advisors are making it worse by picking and choosing who they work with based on investable assets. The empathy is missing, and the world is noticing. What if we could deliver a connected, empathetic experience?

Empathy: The Bridge to Engagement

After more than 10 years with Maddock Douglas, an innovation consultancy with a large footprint in insurance and financial services, I’ve learned a lot about ways to predict what the future wants from an industry or business. We did a prediction study in 2020 around the post-pandemic future of human advice, across industries that rely on intermediaries to sell products and services. One of the many compelling predictions is that empathy, within the next 3.6 years, is 77% likely to be more important than credentials when selecting an advisor. In addition, within a similar timeframe, it’s 67% likely that technology platforms (e.g. Uber or TripAdvisor) that help the financial advisor understand people’s deep-seated attitudes and needs, and deliver seamless, elegant solutions will be more important than a brand affiliation. So how do we move from empathy to action? Engagement.

Maddock Douglas’s co-founder and CEO, Mike Maddock, says “Despite the fact that billions of dollars have been invested in ‘digital innovation’ nobody in the industry has stopped and considered how to deliver empathy at scale. There is a huge opportunity to create a digital platform that engages pre-retirees at a personal level in these big decisions. While, pieces of the puzzle exist within different fintech and insurtech startups, the real missing link is at the top of the funnel –– where people meet people. With the proper measure of insight, targeting and consumer understanding, technology could be used to create the empathic engagement that leads to action. We believe that soon, someone will put it all together and dominate the industry.”

We are just now seeing data from pioneers in this space. One group attacking this “top of the funnel” engagement challenge reports over 50% conversion rate when harnessing a hyper-personalized, behavior-driven, non-judgmental approach to boomers and decumulation.

That engagement is not around calculating “your number”, causing self-esteem to plummet by the deliberately embedded inadequacy into the model. Rather, it’s engagement around you. That’s where we are seeing innovation today.

Engaging Around the Right Thing

Instead of how much you have saved or will save, how about what you value? What bugs you? What excites you? How do these things translate into an experience of learning about yourself? There’s a reason why Facebook quizzes, horoscopes and personality type tests are endlessly fascinating to people. The subject is you. And not in the light of what makes you better or worse… rather, what makes you special. Most importantly, it’s not just engagement with a tool, it’s also engagement with a person.

Given that the human element is lacking, and behavioral science is only just starting to be leveraged into the retirement industry, how do we fill the gap? First, isolating the critical part of the journey, as Mike Maddock said, at the top of the funnel. Said differently, examine the moment when people are open to learning about themselves in the context of their future, and then turning it into an active desire to seek personalized, customized advice from an empathetic, knowledgeable human being.

With so much emphasis in the last 5 years on digital disruption, it’s very possible we are throwing the baby out with the bath water. Digital technology can eat certain tasks of an advisor, but it can’t, and likely should not, eat the job of being a human. So instead of trying to make the robo do the whole job of creating awareness, educating, driving action, transacting the sale and servicing, instead we should be looking at the robo and the human as a division of labor. To that end, the role of technology at the top of the funnel is very different than in the middle or the end of it. At the top, it’s to engage, and drive people toward advice, not just toward a product or a behavior. In the middle, it’s to make the transaction simpler, faster and more accurate, both for the consumer AND the advisor. And then at the end, to make it easy to tell the world about the experience.

The American Dream Lives on a Two-Way Street

Who is truly taking on the task of creating positive engagement that drives people to seek empathetic advice from a professional? Perhaps the first step is having advisors who truly want to help people, then having a model to do so efficiently, so that someone’s current wealth doesn’t dictate their advice worthiness. Once people know they are worthy of advice, they will be less likely to feel shame, and more likely to seek out advice.

If there’s one thing the pandemic has taught the world, it’s that we can collaborate and do business virtually, and dramatically reduce time and cost of travel. Perhaps with this new knowledge, more advisors will be willing to work with people who don’t meet the former thresholds of investable assets, but truly need help. We just need to finish the job of creating the platform to make it happen, and letting the world know we are ready, willing and able.

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Maria Ferrante-Schepis, CLU, is president, insurance and financial services, for Maddock Douglas in Elmhurst, Illinois.