(Version of this article originally published in NAPA Net by author)
Does employee education work? Probably not the way that the 401(k) industry currently offers it. No question, advice works better as it is individualized – but is there a better option?
There’s a proverb that if you give a person a fish, you feed them for a day; teach a person to fish and you feed them for a lifetime. According to Terri Levine, a professional coach:
Advising is something that consultants do, and in asking a Consultant for advice, you are asking for answers and solutions and action steps you should take to reach a certain result. A coach helps you find the answers to your issues yourself, and in so doing, you learn more…
No doubt that many plan participants not only want to be told what to do but want others to do it for them. While the Ideal Plan inspired by behavioral finance professor Shlomo Benartzi is effective is garnering significant results with minimal work, no one is suggesting that we should give up on working with participants especially when it comes to the distribution phase. Even Benartzi admits that in retirement, or preparing for that next phase, engagement is important.
Coaching is a co-creative process. Many of us see the power of coaching with our children as they learn to do for themselves v. constantly being told what to do, step by step. Though most investors might prefer to be told what to do, their engagement makes the process infinitely more rewarding.
The pending DOL conflict of interest rule as currently written would restrict access to advice for investors with smaller accounts. Technology and imbedded robo advice will help but not as much as the power of coaching which enables people to take some action, with guidelines and protection, on their own.
Sometimes the financial services industry makes things complicated so people will ask them what to do it without questioning the value or cost. To be a coach, you need to understand the level of sophistication of the student, adapt accordingly, make things simple (use analogies from their world, not yours), be patient and make it fun. Teach them to how fish – it’s harder but better in the long run.