Not all employees are alike so designing benefits, especially retirement plans, should be customized not just on their age or salaries but also on their personality types. State Street Global Advisors (SSGA) conducting their fourth annual “Retirement Confidence Monitor” suggests that there are four types of financial personalities based on their level of financial confidence and literacy which require difference types of engagement and communications to improve their chances for a successful retirement.
Looking at US, UK and Ireland based on surveys with almost 3,000 participants, overall confidence remains high at 52% in the US flat from 2015 but up from 21% in 2013. People are more confident about investing than ever understating the investment options in their employer’s retirement plan though just 38% of US employees would select the plan’s default option while a majority would do so in other countries.
SSGA in collaboration with a market research firms, BRT, created four different types of personalities based on a combination of a person’s financial wellness index and financial literacy. The wellness index was based on a series of questions about stress, debt management, retirement and emergency savings, and healthcare costs; literacy was based on the person’s ability to answer eight simple questions.
The result is four distinct personalities which include:
- Passenger – tell me where to go
- Follower – give me info and tell me
- Homebody – not interested
- Adventurer – I’ll meet you there
With each personality, SSGA suggests different plan design options and communication strategies. For example:
Passengers have low confidence but like automatic features and do not need a lot of detailed communication or engagement. Plan sponsors should consider a strong default investment option, as well as auto-enrollment and auto-escalation features.
And for the Follower:
Followers have moderate confidence and like to engage with information. Followers welcome assistance, so leverage their curiosity with online tools and check lists that link investment and financial knowledge with specific actions that will help them meet their retirement savings goals.
Though the Ideal Plan has made a huge impact on retirement security, the next frontier is participant engagement and customization. Understanding personalities is an interesting way to segment investors.
