Knowing me… knowing you

01 April 2017 Old Mutual Private Wealth Management

Most employees are handed the enrolment forms for their new employer’s retirement fund on their first day at work. If they are lucky, they may also receive a member booklet and be referred to a website for more information on their retirement fund. Seldom are they given any more information on the topic as their new job is regarded as being the priority.

Without a doubt, there is a huge role the financial adviser can play but, with so many conflicting priorities, it can be difficult for employers to appreciate the importance of financial wellness in the workplace.

There is also the question of costs, including the time employees have to take during working hours to look at their options, the financial adviser’s time and who will be responsible for paying the fee?

Value-destroying behaviour
The February 2017 Old Mutual Corporate Retirement Monitor shows a dramatic decrease, over the past year, in the number of employees planning to preserve their savings should they resign from their position.

The report states that the number of working South Africans who are likely to cash in their retirement savings has increased from 19% in 2012 to 35% in 2016. This is enormous value-destroying behaviour, as it reduces the impact of compounding investment returns over the 40 years of a member’s working life..

It is particularly challenging to get younger fund members to take an interest in saving for retirement. Yet, if we could get young members to understand the enormous benefit of consistent monthly saving over their working lives coupled with compounding investment returns the outcome would be amazing.

Providing employees with an easy-to-understand and cost-effective means of saving for their retirement years is a social imperative. However, if employees do not understand the value and benefits of saving for their retirement, there is a risk that employers will capitulate to the employees’ preference of rather receiving additional cash in their bank accounts.

Increasing members’ engagement
The 2016 Sanlam Benchmark Survey on Employee Benefits showed that less than 10% of South African fund members are on track to achieve a secure retirement.

So, what role can financial advisers play to increase members’ engagement with their retirement funds?

1. Simple and quick access to fund information. Quick-reference tools, such as snapshots or summaries — both online and on paper – should make it easy for employees to find fund-related information. Information should also be sorted either in alphabetical order or by life event. Member surveys such as the Sanlam one show that many retirement members do not even know which retirement fund they belong to. Financial advisers have to ensure that every member can log into the member portal or, at the very least, knows how to access the fund’s web page.

2. Use consistent and plain language. This means using the same terminology to describe the same provisions in your forms, statements, online tools, presentations and newsletters. The language and terminology of one fund may be quite different to another and it is important to consistently use the same terminology, relating to the particular fund, in all your communication. Add simple definitions of technical terms, on the same page.

3. Personalise it. One of the best ways to simplify information is to make it more personal to the intended audience and to provide focused and customised communication. For example, there is no need to send information on spousal benefits to single members, but an easy-to-understand education cost calculator will add significant value to a member with small children. The information relevant to new members is very different to that of members approaching retirement age.

4. Test your material. It may take some time and effort to create a representative cross-section of members to test your communication, but it will be worth it. You will not only improve your communication, but may also give members a sense of ownership, turning them into fund advocates.
Above all, remember the most important rule of member communication: understand and consistently use the members’ communication preferences, not your own.

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