Rob Capone, Head of Defined Contribution, LGIMA.

Understanding the needs of end-user consumers is an important and often overlooked area of the US retirement phase that must move with the times. Those were the thoughts off senior pension financial services at a recent webinar.

In a recent Clear Path Analysis report, “Solutions not Products - Mitigating Risks in the Drawdown Phase of Retirement”, co-produced with LGIM America (LGIMA), several industry figures, including Rob Capone, Head of Defined Contribution, LGIMA, gave their views on the issues surrounding the US’s changing retirement market, and what it needed to offer potential employees from pension plans.

“Sometimes what we lose sight of is that the benefits universe does not revolve around the DC sun.”

James Veneruso, a participant, was asked if he saw offering a good benefit plan as something that potential employees wanted from their employer in today’s market.

“Yes, and in my position I have always focused on Defined Contribution (DC),” he said. “Sometimes what we lose sight of is that the benefits universe does not revolve around the DC sun.”

He said that many times, those ‘laser-focused’ on DC tended to forget that other benefits such as health benefits can drive things. “DC is frankly ancillary to these benefits to the degree that we can think more holistically about overall benefits and bring them together to participants would be helpful.”

"Providing information and giving information to providers to access this data to create more finely customised services is something people cringe at. It’s an interesting paradox.”

This, he said, revolved around getting better at engagement. “It will be interesting to see how much further personalisation and engagement play off one another. We could all deliver much better, more custom-tailored benefits to participants if we had more information but there is this interplay of people not necessarily wanting to provide this information to the providers,” he continued.

“On the one hand, they are on their phones sharing videos of their vacations, which is something extremely personal, but, on the other hand, providing information and giving additional information to providers to access this data to create more finely customised services is something people cringe at. It’s an interesting paradox.”

UK thinktank Centre for Economic Policy Research (CEPR), released a 2021 technical report “Increasing engagement with retirement through personalised communication?” argued that, like Veneruso suggested, engagement at this level was key. “One solution is to rely on personalised communication. Personalisation implies tailoring communication to accommodate individual users,” the paper said. “The idea is that personalising retirement communication ought to appeal to individuals more directly and increase engagement. Personalisation can be applied in various forms. On a very basic level, one can personalise by, for example, addressing people by name.”

Trends and challenges

The trends emerging with new technology and generations coming into the workplace meant more had to be done to reach out to them and the industry had to respond in turn.

Fellow participant, Rob Capone, reiterated this, and added to the points of finding new ways to engage – especially concerning data.

“The data becomes a challenge to the trend, if you think about the confluence of wealth practices, advisory services, and management, these almost conjoin with retirement planning and retirement practices.”

“It all stems from a planning process around financial wellbeing and wellness that would cover estate planning, wills, health benefits, food, and housing,”

He explained, that as providers, the industry was moving in a direction of a more holistic service delivery - particularly for those who are in retirement or for those who are decumulating their money.

“It all stems from a planning process around financial wellbeing and wellness that would cover estate planning, wills, health benefits, food, and housing,” he said. “The confluence of providing these types of services holistically across wealth and retirement will continue to evolve.”

This issue is widespread – and outside the US as well. Pension consultant Hyman Robertson released a report for the UK industry in 2022, which showed widespread problems if innovation wasn’t incentivised, and holistic measure weren’t taken to educate avers. “Just over half (59%) of members with pot sizes up to £100,000 ($126,000) understood the communications sent to them from their provider which compared to three quarters (76%) of those with pot sizes above £250,000 ($315,000) who said they understand communications from their provider,” said the report. Hyman Robertson warned “DC scheme members’ financial futures at risk, if providers don’t innovate with holistic products”.

“Only 62% of those with pots up to £100,000 felt they had access to all the information they need to make important decisions about their retirement, compared to 81% of those with pots over £250,000,” the report said.

All of this added to the challenges of appealing to an already hard-to-reach-market. The main challenge around this issue, however, Capone said, was the data – specifically who owns it and who is willing to give up the data to message, educate, and communicate the right products and services for those participants who are in retirement and looking for these types of services.

“Does the participant own this data?” he said. “Or is it the record keeper or is it the advisors that own the data?”

“The challenge that we see in the industry from more of a provider perspective, which is putting the participant a little on their heels, is around who owns the data, who has access to it and who ensures that it is accurate so it can be used in a positive way to the plan participant.”

You can read this in full and see the rest of the report, by clicking here. 

 

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