workforce and economics

Communicating trust =
saving more

Apr 19, 2016
By Laurie Rowley

Retirement savers need to make good decisions for their future, even more so given that people are living longer. One clearly identifiable impediment to them doing so is their low levels of trust in financial institutions.1 The retirement pension industry needs to: (i) acknowledge the seriousness of low trust levels; (ii) understand the minutiae of how this problem affects decision-making by retirement savers; (iii) devise effective solutions.

The challenge

Although trust in financial institutions is low with all savers (12%), among baby boomers the number is a derisory 5%.2 This is especially consequential given they have reached a period in their lives of unprecedented financial complexity: specifically what set of decisions should they make to ensure their retirement savings provide adequate funding for the duration of their post-work life. If they do not trust the financial institutions who are managing their retirement savings, the odds are stacked against them making good, fully informed decisions. Why? Because trust has been proven to have a direct impact on engagement (including activities like saving more, using tools and calculators, planning, budgeting and using products). They will not be making good decisions because they will refrain from making decisions at all.

Methodology for building a solution

The National Association of Retirement Plan Participants (NARPP) has a track record of working through ‘big picture’ challenges which are: (i) simple to state and understand in principle (e.g. low trust is negatively impacting constructive engagement with financial decision making); but (ii) which have complex underlying causality. Manifestly, a complete, implementable solution to such challenges requires that plan sponsors and industry leaders have a deep understanding of both the “big picture” and the details.

The solution: Communication and building trust

Trust between people and entities results from the sum of their interactions. One of the foremost interactions is, of course, communication. Therefore the effect that communications have in building or eroding trust is paramount. It cannot be overstated nor can the results be ignored. Communications which have been designed with trust in mind create messages which are more sustainable, clearer, transparent and easier to use. The information imparted ends up being more “sticky.”

Given the challenges described, the retirement pension industry needs to radically improve communication experiences if we want to see significant improvements in financial decision-making. To design such solutions, we need to understand what actually builds trust, integrate this into communications, measure the outcomes and, if necessary, iterate. From many hours spent working in the field, NARPP has developed, tested and verified a number of elements needed to create communications which are engaging, educational and trust building. Moreover, our research has found that with such communications, people are positively affected and on an emotional level. They feel more in control, more committed, more satisfied with their decision and more regretful if they do not act. Better financial decision making is facilitated with aging populations as well as lower literacy savers. People are encouraged to take trust-dependent actions like increasing the amounts they save and adopting new products.

Conditions and assumptions

From its previous experience, NARPP has shown that improved, trustful communications can be inserted into the retirement savings process in a low-cost, high-impact manner.3 This can be done without the need for time-consuming lobbying in aid of policy change. Perhaps even more important to emphasize: this is an industry-wide challenge, the solution to which will improve one of the most pressing social problems of our generation. Given this is genuinely an issue for us all, traditional notions of a zero sum game or outdoing one’s competitor are not applicable. Success here means success for everyone. NARPP sees its role as that of facilitating a coalition of providers and asset managers in re-engineering communications to speak faithfully and compellingly to 21st century audiences. We have begun doing it and can scale our solutions across the industry.

This content has been developed for the U.S. market.

Communicating trust equals saving more

Hear Laurie Rowley share her idea on how communicating trust results in saving more for retirement.

Laurie Rowley

About the author

Laurie Rowley
President & Founder, NARPP

Laurie is a passionate advocate who is at the nexus of initiatives to increase financial literacy, make information transparent and accessible and improve outcomes for the millions of Americans saving for retirement. Laurie is a performance driven leader and entrepreneur known for successfully executing an organizations vision and overcoming challenges. Laurie has over 25 years of experience in financial services. Over her career she started several research firms including helping launch the Behavioral Finance Forum. Her expertize is in financial decision-making, research, operations and managing large scale, high impact projects.