How Pennies, Instead of Percents, Can Drive Participant Engagement

Simplifying the often jargony language of retirement savings, such as explaining money in terms of cents instead of percents, can significantly drive participant engagement, according to George Fraser, managing director of the Fraser Group, speaking at the 2023 PLANADVISER National Conference.

“If you ask the average person what 1% of $1 is, they always say 10 cents. Almost always,” Fraser told a group of advisers and plan sponsors at the Scottsdale, Arizona-based conference, emphasizing that the correct answer is one cent. “We use words in our industry that are terrible. We need to simplify things, and the penny method works. Everybody believes they can save a penny.”

Research by behavioral experts from UCLA revealed through a years-long study that using words like pennies instead of percents did, in fact, encourage people to save. That research was inspired, in part, by the real-world work of adviser Fraser and the success of his client, Bicycle Casino, while working alongside Joy Harn, then its chief counsel.

Harn and casino leadership had reviewed advisers as they looked to improve retirement plan participation from rates of around 50% of their employees. Fraser and team’s message of simplicity resonated with the Bell Gardens, California-based company.

“George was not dressed like he is today,” Harn noted, pointing to Fraser seated beside her in a blazer. “He would come in wearing a T-shirt and jeans. He met them as people and wanted to know what they needed.”

The first major change Fraser and team recommended for the Bicycle Casino was automatic enrollment for new employees to drive participation. At first, Harn was apprehensive about auto-enrollment for the casino workers, despite Fraser’s insistence.

“Given the fact we did not want to be paternalistic, that it’s [the worker’s] money, and knowing that they are minimum wage-earners … the idea of us as a company automatically taking their money set off red flags for me,” she said.

Eventually, in part because participants could opt out, Harn agreed to auto-enroll workers at 2 pennies for every dollar of their paycheck, she said. In time, leadership at the company saw that employees were not opting out. The casino then put longer-term employees into the auto-enrollment plan. Once more, almost nobody opted out.

“Using a casino term, they were letting it ride,” Harn said.

Eventually, the firm implemented auto-escalation, also on Fraser’s advice, and Harn said that, too, stuck. “[Employees] are in for Year 1 … and then it would automatically escalate on that anniversary,” she said. “We held our breath. Again, very few people opted out.”

Along with the automatic features, Fraser and Harn pointed to consistent interaction with participants as crucial steps to improve engagement. Whenever Fraser had an opportunity to meet with casino employees, he jumped at the chance.

“Whenever we had multiple employees in a room at one time, he would say, ‘Give us a booth in the back and let us do that engagement,’” Harn said.

Fraser said he believes an important part of engaging participants is to have fun with the interactions. His team will arrive at a facility with a taco truck and a large banner stating, “Prepare for a Spec-taco-lar Retirement.” The taco truck gave his team the opportunity to grab the employees’ attention so they could have more in-depth conversations.

“I find that when you break bread with someone, it changes the dynamic when you get together with them,” Fraser said. “It really works.”

After the work had been done, Bicycle Casino staff were up to a 98.2% participant rate for an average of 9.2 pennies on the dollar.

“This plan with Joy was the best plan in the country,” Fraser said.