Digital Guidance supports people taking tough decisions but it cannot take those decisions for them.
Even when a decision is taken not to do something – like not to choose an investment strategy or pay voluntary contributions, people feel guilty pressing “next“!
Faced with impossible decisions people tend to give up and turn off the computer- or go and do something on Facebook
People make choices based on what they want in life but they hate taking decisions about financial products.
This is one of the reasons opt-out rates are so low. The decision to opt-out is far too difficult; and without it being framed properly, the question is seldom properly considered.
So if I would ask you,
“which would you prefer, go to the cinema tonight or put a tenner in your pension?”
…you’d probably take the cinema option, but if I framed it,
“I’m taking a tenner from your pay so you can have a proper retirement unless you insist on going to the cinema tonight”
you’d probably say –
“oh go on then”.
But if I told you,
“I’ve been taking a tenner a day out of your salary for the past ten years and (ha ha) you never noticed and now you’ve got a shed load of money for the rest of your life”
I bet you’d say,
“Thanks very much”
If the point of financial education is to encourage participation, in the words of the song “you say it best, when you say nothing at all”.
But good employers want more than a low opt-out rate, they want people to engage with the pension scheme and make positive choices that make a real difference to their later lives.
“Saying nothing at all” is not the way to do that!
When the choice is binary “in/out” “default/choose” “save/don’t save”, then people can be nudged into the no-brainers – in –default – save.
But when the choice is between a certain (but limited) income and a fat wedge of cash in the bank, engagement is critical – critical to getting people knowledgeable about what these choices mean.
When done well, digital guidance can “narrow” choices and link those choices to differing outcomes. This enables people to feel comfortable that it is not a financial product they are choosing, but the outcome from using that product.
For instance, investing in a conventional lifestyle program can be framed as
” taking the guessing out of when to buy your pension”,
“making it easier to spend your savings”.
It should not be about
“choosing gilts and cash over equities to deliver an optimal flight-path”.
In the context of the need for an emotional response to the choices on offer, we can better understand why “people buy people”. Digital guidance is pretty good to get people from B to C but the “A to B” needs the personal touch.
Before people are going to download the app or log on to the website, there needs to be a spark.
Whether that spark is generated around the water cooler or through a formal seminar, it is unlikely that it will happen without a conversation.
Most people download the apps they use for daily living through recommendation. I downloaded an app yesterday to help me track London busses because I saw someone use it. Interest in technology has to start with a conversation.
This matters particularly for financial education delivered in the workplace.
The reason to run a face to face financial education program is to start that conversations. So it’s critical that the education program promotes the digital guidance available to members.
Whether it be an app, or a website – whether delivery be via text, spread sheet or video, financial education must reference what is available elsewhere and make sense of the employee journey to making the choice.
Which is why preparation is so important. A Financial Education program must be properly integrated into the employer’s communication strategy and not be “free-standing”.
Likewise, digital guidance, no matter how good it may be, is useless without engagement.
The key for the employer is to ensure that whoever delivers group sessions is able to properly explain how the employee journey works and how –with or without digital assistance – members can translate tough decisions into easy choices.
We generally have more information than we cope with, we need people to help us convert some of that information into knowledge.