Retirement Plan Information: Paper versus Electronic communication Dilemma
While legislative and regulatory policies are allowing the plan providers to have the electronic delivery of communication as their default channels, the story is different from plan participants’ standpoint. Plan participants want the paper communication as the default channel, with an option to choose electronic communication, if required. I was wondering whether there is a need for the retirement industry to catch up with the current industry trends. To understand the psychographics behind the plan participant behavior pertaining to preferred channels for retirement plan information, survey results of both the Plan Sponsor and AARP were studied from close quarters.
As per AARP report dated Nov 2012, in an average sample of approx.1000 plan participants with an ideal mix from all age groups, 92% of the respondents have internet at home and 93% of the respondents have valid email address. Related to the internet usage frequency, 70% of the respondents read their mails at least once in a day and 10% of the respondents at least once in a week. With such a high internet usage percentages, when inquired about current mode of receiving retirement plan documents, 60% of them receive paper communication, 27% of them receive both paper and electronic communication and only 7% of them receive electronic communication only. Most of the plan participants would go with the default communication channel provided by the plan providers. To understand personal preference of plan participant information, shockingly a majority of the respondents (75% of the respondents) still prefer paper communication to electronic communication (which is only 23%). Reasons being many (some are really trivial) like ease of reading and archiving the documents, access to the documents when no access to internet is available, ease of carrying while seeking advisor assistance etc. A few other respondents stated that their inboxes will be flooded with so many spam mails, it is a daunting task to search and archive retirement plan communication.
When providers are arguing about the effectiveness of communication channels, there are a few participants who question the need of communication in first place! Participants of this segment never care to read their plan communication. However when asked for the choice of communication channel, they did opt for paper communication. They believe paper communication is an easier way to archive, compared to searching relevant mails from inbox and save them in a separate folder.
Plan Sponsor didn’t mention the survey details like sample size, participant demographics in the article (How would you prefer to receive your retirement plan communication, February 2013) to understand the representativeness of the sample participants, but a few statistics caught my attention. The middle segment which is opting for both the paper and electronic communication is expanding on a slow and steady pace. Most of the participants from this segment prefer paper for participant statements, and electronic medium for other communications. A few are looking for a mix of electronic media, like mails and participant websites to access more information in lieu of paper communication. But again this is a very small set of participants in the age group of 25-40. This is definitely a welcoming change!
One fact that stands out is that the technology adoption rate in the retirement industry is very low. Till date I thought it was the problem with plan administration organizations alone, now from these surveys it is clear that there exists challenges related to technology adoption across the retirement industry value chain. Plan providers still relying on legacy systems for critical business operations, participants still clinging to the paper communications in the era of mobile and social media communications, vindicate this view.