Behavior analysis can help improve retirement outcomes, says expert

The year 2019 could be the retirement industry’s year of looking forward and influencing better retirement outcomes for America, predicted Tim Rouse, Executive Director of The SPARK Institute, in his opening remarks at the 2018 SPARK Forum. A prominent event for the US retirement services industry, the conference was held from November 4-6th, at The Breakers Palm Beach, in Florida. Congruent was a Silver Sponsor here, and a team from Congruent registered as delegates to attend the event. We will share interesting insights and key takeaways from some of the SPARK Forum 2018 sessions, in a series of blog posts this month. In a session titled ‘Behavioral Governance: How Neuroscience is Being Used to Improve Fiduciary and Retirement Outcomes’, Don Trone, founder and CEO of 3ethos, explained the interrelationships between leadership, stewardship and governance. He also spoke about why ‘Behavioral Governance’ is an important factor in determining the quality of retirement outcomes – the focus here is on the behavior of the plan’s fiduciaries, instead of the participants. Qualities of a leader Trone said he researched the “confluence of leadership and decision-making”, after studying how people demonstrated leadership skills during natural disasters and other such events. Developing the 3D model of ‘Leadership, Stewardship and Governance’, he started using this model for financial industry executives. He views leadership (inner ring), stewardship (center ring) and neurological capacity (outer ring) as concentric circles. Leadership, he said, is the ability to inspire and engage others. Great leaders are “courageous, competent, character-full, compassionate and collaborative”. Stewardship, he said, “is the passion and discipline to protect long-term interests of others”. Five key qualities associated with stewardship are “(being) aligned, attentive, authentic, adaptive and accountable”. Neurological capacity markers were: vision/inspiration, self-complexity, situational awareness, executive control, social astuteness and procedural justice. He explained the need for a uniform decision-making framework, with 5 steps – Analyze (Define roles, state goals), Strategize (Identify risks and time horizons), Formalize (Define and communicate strategy), Implement (Implement strategy, formalize financial controls and procedures) and Monitor (Monitor strategy, scrutinize for conflicts). Behavior analysis for decision-makers Trone said that in the past, behavior analysis and studies have always focused on the behavior of participants. However, he added, behavior analysis should be extended to advisors, investment managers, and so on, to ensure good outcomes for the participants as well. He pointed out that more than eight million men and women in the US serve in a fiduciary capacity, and “are responsible for 80% of nation’s liquid assets”. We need to accelerate the development of leaders and stewards who are serving in critical decision-making roles with the use of neuroscience, Artificial intelligence (AI), and Augmented Learning (AL), he added. He highlighted the need for assessment of leaders through psychometric evaluation.