The defined contribution (DC) plan market is increasingly dynamic with a wide array of industry forces, priorities and innovations in play. In the wake of on-and-off industry reform and legislation along with a continual stream of fee-related litigation, DC plan sponsors are being courted with the latest solutions designed to propel participant engagement, foster financial wellness and, ultimately, increase participant retirement readiness.

Fee Sensitivities

There are several factors at play. Many are still struggling with the challenges of managing plan costs and navigating the myriad of fees associated with offering their employees a competitive 401(k) plan. As the DC industry modernizes and becomes more efficient, the struggle with plan fees continues to hover over many organizations, exposing a disconnect between plan providers and plan sponsors. While Micro plans remain the most fee-sensitive segment, Small-Mid plan sponsors appear to be experiencing the most angst and are poised to take more definitive action this year, reporting an increase in likelihood of launching a formal 401(k) plan review or switching DC plan providers. In contrast, Large-Mega plans, which command higher rates of negotiating power, enjoy the freedom to think more holistically about participant needs and are better-positioned to harness the latest innovations.

DC plan sponsors are being courted with the latest solutions designed to propel participant engagement, foster financial wellness and, ultimately, increase participant retirement readiness.

Brand Differentiation is Key

That said, DC plan providers and DC investment managers must become better-adept at identifying the most effective ways to engage and educate each segment of the market on their unique brand differentiators.

This is why The Lift Factor has worked with several DC plan providers, some of the largest in the industry in fact, to really hone in on their unique differentiators, and define a value proposition for each audience. We also regularly preform a competitive review or sweep of the major players—so we know the messages they are presenting and in what media. We are well versed in the defined contribution space and we also very keenly understand what plan sponsors are looking for when they seek out a provider, their sensitivities and concerns. Likewise we have studied participant behavior to understand their pain points—what is stopping them from investing, or investing more. And also, we benchmark how happy they are with their provider. Using this information we have crafted unique participant directed campaigns based on life stage, investment concerns, and the like. They can be as specific as trying to capture rollover dollars, educating around investment choices or speaking to competing investment concerns, like college savings. But they can also be as involved as pinpointing an individual’s specific concerns through modeling of personas and placing them on a communication track to educate and create action.

No Longer Optional: Using Social Media to Reach Ready-to-act Investors

When thinking through outreach campaigns, we also determine which media to promote. Crafting effective social media campaigns is increasingly important. It is the best way to disseminate thought-leadership information and can be done by partnering with DC advisors and consultants, subject matter experts, trusted to serve as influential educators. As a DC provider, engaging this valuable audience with at-the-ready content also strengthens your partnership with these critical decision-making facilitators.

While social media use is the norm among affluent investors overall, recent findings reveal that ready-to-act (RTA) investors are using social media at even higher levels. These investors report using at least 2.4 social media sites each month on average compared with an average of only 1.8 social sites for investors who do not plan to make an investment decision in the near term. A social media presence is no longer optional but is quickly becoming a mandatory component of a distributor’s or product provider’s successful marketing plan and media strategy. RTA investors are substantially more likely to use social media for investing and financial purposes, making them an even more attractive social media audience for distributors and product providers.

While social media use is the norm among affluent investors overall, recent findings reveal that ready-to-act (RTA) investors are using social media at even higher levels.

The question for financial services advertisers is now “what combination of sites should be considered as part of a holistic media buying and marketing communication strategy?”. Critical first steps include examining requirements for fit with each site’s core strengths—attracting fans on Facebook, viewing thought leadership and investor education videos on YouTube, creating groups of peers on LinkedIn, and influencing hashtags on Twitter. Ultimately, providers who advance their social media strategies now will realize the greatest return on their marketing dollars with this key segment of investors who are ready-to-act.

Financial Wellness Adding Value and Not Going Away

Faced with increased pressure to demonstrate added value, DC advisors are offering financial wellness programs more frequently. Financial wellness programs, which are designed to educate employees about how to manage their personal finance challenges such as debt reduction, asset management, unexpected expenses as well as saving for retirement, are soaring.

Nearly four in ten (38%) DC advisors incorporate financial wellness into their offerings, a significant increase from the 29% who reported doing so in 2016. Independent producers are driving the overall increase in financial wellness program availability.

Perhaps even more strikingly, the way advisors are designing financial wellness programs appears to be shifting, with a higher proportion of DC producers using their firm’s proprietary model in lieu of a plan provider program. In fact, nearly two-thirds (64%) of DC advisors offering financial wellness programs rely on their advisory firm’s proprietary model, a significant increase from 44% reported in 2016. This trend not only signals a desire for firms to differentiate themselves but also a potential missed opportunity on behalf of DC plan providers to create programs that meet the expectations of DC advisors and, ultimately, plan participants.

Customer Service Still Reigns Supreme

DC plan providers and DC investment managers must also be ready to back up their brand differentiation, through leadership and sold design plans with superior client service. At the end of the day it is the most important metric.

Contact The Lift Factor to discuss our expertise in this market in more detail, and for a complimentary overview of your current defined contribution marketing plans or campaign.

 

 

 

 

Insights by Cogent Reports™    with reporting by Sonia Sharigian