PANC 2015: Controlling the Message

In the last 20 years, 401(k) plans have changed dramatically, said L. Rita Fiumara, first-vice president, investments, at UBS Financial Services, speaking at PLANADVISER National Conference in Orlando, Florida, on Wednesday. Yet negative messaging from the media and dissatisfaction on the part of retirement plan participants are still rising.

One irony of the current negative message, Fiumara said, is that 401(k) plans have continued evolving and show vast improvements over the past 20 years: Daily instead of quarterly or semiannual valuations, a much better understanding of share classes and more robust education programs are widespread. And it may be even easier today than it was 20 years ago to reach participants. Fiumara points out that plan sponsors used to insist on on-site education or one-to-one meetings to reach those participants without computer access. These days, nearly everyone has a smartphone, she observed.

Fiumara, recognized in 2015 as PLANSPONSOR Plan Adviser of the Year, said that the industry needs to take a step back and acknowledge the changing demographics of families today. “If we’re trying to change the perception, we have to know and understand the investor,” she said.

The several demographics that occupy the typical workplace all have different concerns and viewpoints. Fiumara pointed out that today’s family can be a same-sex couple, a single parent or a blended family after a remarriage, making it all the more important for advisers to understand the point of view of the investors they try to relate to.

Americans are constantly challenged by societal pressures to update kitchens, buy new wardrobes or cars, or take vacations, Fiumara said. “Spend, spend, spend!” she said. “But as financial professionals we’re responsible for bringing in the savers. A 50% probability exists that a lot of people do not have adequate retirement savings.”

Competing and sometimes conflicting statistics could be part of the problem, Fiumara said. Though varying state to state, the median income for an upper middle class couple averages about $100,000; many surveys say that $250,000 per spouse should be adequate retirement savings. Yet, with rising life expectancies, more people can expect to live 20, 30 or even 40 years in retirement.

One perception that needs adjustment, Fiumara said, is that people don’t think they’re going to live to age 75—but everyone needs to plan for longevity and the cash they will need in retirement.

As so many participants are nowhere near ready for retirement and as employers and regulators recognize this, public perception of the financial advice industry may be that of falling short on the job. “The reality is, maybe they are right,” Fiumara said.

Trying to make meetings educational and relatable is a challenge, Fiumara said. Nearly three-quarters of advisers in the panel said they use a classroom setting for education. Just a quarter (24%) said they use webinars. Appropriately targeted, relatable education can help the industry’s image, Fiumara said.

An audience poll revealed that about a third of advisers use customized education materials that include Gen X (31%). Millennials (26%) and Baby Boomers (36%) are other recognized demographic groups, but same sex couples, at 3% of a customized education plan, or singles (13%), could be underserved populations in need of messaging that speaks to them.