Last week, I attended the Retirement Industry Conference in Las Vegas sponsored by LIMRA, LOMA, and the SOA. Below are my notes and observations on three themes that ran through the conference: 1) looking to different disciplines and industries to spark innovation; 2) becoming more customer-centric; and 3) the use of technology and social media.
At the end of my post, I also include some notes on a very interesting case study of Eddie Bauer’s 401(k) plan. Two key takeways from that presentation:
- The most important brand may be the employer’s not the plan provider’s.
- There will be greater use of “tactile” applications to increase engagement and a continued shift from focusing on participant “education” to changing participant behavior.
Next week, I will do case study of 401(k) plan makeover that I will be presenting at the 2014 Retirement Industry Conference.
Looking outside of our fishbowl
Several presenters across multiple panels cited the need to employ behavioral science and to look to industries outside of financial services and insurance for innovation inspiration. Some examples:
- Changing distribution. Pharmaceutical manufacturers reshaped the distribution landscape by marketing directly to consumers
- Innovate like Apple. Apple was cited by at least 3 different panelists as an innovation model. Can the industry innovate like Apple? One made the point that Apple does not have focus groups. They do not ask customers what they want because their customers could never articulate the products that ultimately fly off the shelves (Apple execs often cite the famous Henry Ford quote, “‘If I’d have asked my customers what they wanted, they would have told me ‘A faster horse.’’’). A bullet in blog post cannot begin to describe the Apple innovation process but this article by Alain Breillatt of Pragmatic Marketing does a pretty good job.
- Creating good habits requires relevant and important benefits. Robert Powell cited noted consumer psychologist Carol Berning – whose experience ranges from saving Fabreeze for Proctor & Gamble to getting Ghanaians to wash their hands after using the toilet (toilets were perceived as clean as they replaced pit latrines) to reduce disease – that the most important principle of instilling habits in consumers is that the benefits must be relevant and important.
Get to know our customers, then build our business around them
The retirement market is too focused on products and the customer is generally viewed as the plan sponsor as opposed to the participants.
- We are ignoring most participants. “Participants” are generally treated as though they are a homogenous group of people. To borrow Great-West’s investor types, people fall across the spectrum from “Do-It-For-Me” to “Help-Me-Do-IT”, to “Do-It-Myself”. Most products are designed and marketed toward the “Do-It-Myself” end of the spectrum, though that is where the smallest part of the population falls.
- We don’t know much about our customers. Financial services and insurance companies know very little about their customers compared to other consumer product companies. The analytics on the totality of consumers’ lives simply isn’t done. Companies selling investment products need to remember that their competition isn’t just other financial services companies and insurers, they are competing with Apple, Sony, and granite countertops.
- We are still pushing products and too focused on lowering costs on commodity services instead of investing in differentiating services. As much as companies claim to be “solution providers” most are not. George Walper, President of Spectrem Group, notes that most retirement management teams are focused on selling products to plan sponsors based on their firms’ operational capabilities and product offerings. We are pushing people online to reduce transaction costs instead of using Skype in call centers for education. He maintains that in the future, plan design, investment management, recordkeeping, and trustee services will all be commodity services. Providers will have to differentiate themselves by providing participant-oriented solutions and relationship management. George points to the many initiatives companies employ to retain rollover assets –“If you are providing them with solutions the moment they come into the plan, they don’t need to decide what they are going to do with the money, they are going to leave it with you because you are the ones helping them.”
Technology and social media
There was a lot of discussion about the use of technology and social media. There was a lot of debate on the use of social media, with most presenters coming down on the side that it is an ancillary tool, not a primary one. The best comments on technology came from Bill Harmon, VP of 401(k) Sales at Great-West Retirement. Here they are, paraphrased:
There are great engines and calculators online, but they are not being used. There is an app called “Angry Birds” that tons of people mindlessly use. How may people us it (about 2/3 of the room raises their hands). Why can’t we build a game that people want to play? The “hip world” is not just kids anymore, it is us. But it is “us” when we get home, not “us” at work. That has to change.
Two interesting applications of technology:
- Transamerica Retirement Services unit is using iPads to do enrollment and can have participants enrolled in as little as 3 taps.
- vWise is aiming to obviate the need for enrollment meetings altogether through web videos. vWise creates content with high production values, serves participants the content relevant to them, tracks the content viewed by each participant for analytics, and makes the content truly interactive by embedding forms and participant activity inside the video. Some early results: A TPA using their system that showed first-time enrollees contributing at an average rate of 8.3% of salary and existing enrollees increasing their participation by an average of 2.3 percentage points of salary.
Eddie Bauer case study
Eddie Bauer had their 401(k) plan with a major financial services company. The plan was not well-used and the company was concerned that their employees would not be prepared for retirement. OneAmerica and Loctkon Financial Advisors teamed up to revamp the plan. Two big challenges:
- Not centralized, lots of locations. Most of the locations – warehouses and retail stores – were not conducive to typical enrollment meetings
- The broad demographics and large age spreads meant many different learning styles
OneAmerica set up a “micro site” – http://www.eddiebauer401k.com – that is still up today, as the enrollment portal. Eddie Bauer’s brand is an outdoor active lifestyle. The enrollment portal and supporting materials were designed to reflect that brand. The companies took the approach of talking to Eddie Bauer associates in the language they used every day, language that was unique to the company. The brand that mattered was Eddie Bauer’s, not OneAmerica’s. A few interesting details:
- Eddie Bauer’s Creed and Guarantee are featured prominently on the portal’s home page.
- The word “retirement” appears just once on the portal (describing a calculator) and once in the 16-page 401(k) Plan Enrollment Overview.
- There are no target funds, but there are lifestyle portfolios based on investor profiles that reflect the EB brand. These profiles are: “Extreme Adventurer”, “Weekend Explorer”, “Day Hiker”, and “Eco Camper”.
- The Eco Camper profile reads, in part: “Recognizes the precious nature of the environment. You are more concerned about the future of our environment and society than your own financial gain.” 15% of plan assets are in the Eco Camper portfolio.
- 50% of all plan assets are in the lifestyle portfolios.