Sponsors and record keepers need to be digital fiduciaries, incorporating greater use and understanding of technology in their efforts to improve retirement savings, attendees at a defined contribution conference were told Tuesday.
"Bring the same oversight and diligence to our digital platforms that we currently bring to investment selection and monitoring," said Shlomo Benartzi, professor and co-chair of the behavioral decision-making group at the UCLA Anderson School of Management. Mr. Benartzi delivered the keynote speech Tuesday at the annual conference of the National Association of Government Defined Contribution Administrators in New Orleans.
Describing some research that showed how changes in plan website technology could improve participation and account diversification, Mr. Benartzi told attendees they should consider creating a digital policy statement, which could be presented "in the same spirit" as the investment policy statement. In fact, the digital policy statement could be part of a sponsor's plan document and should include a discussion about monitoring results of data enhancements to "look for evidence that something is working," he said.
He also recommended that sponsors incorporate digital design knowledge in their plan committees. Plans that lack personnel with sufficient expertise can outsource the responsibility, he said.
Mr. Benartzi encouraged sponsors to "test, test, test" website design changes for effectiveness.
He told them to make suggestions to record keepers about their observations and ask record keepers to explain the data to support their website design recommendations. Success depends on "evidence-based innovation," he said.
As for participants, he said, the key to encouraging them to save more is for sponsors to "think how to make things easy."
Referring to research he conducted for Voya Financial, Mr. Benartzi said the more participants reflect on financial decision-making the better their projected income-replacement rates.
That call for deliberation is contained within a reflection index he developed in his role as senior academic adviser to the Voya Behavioral Finance Institute for Innovation. Components of the index include attention, such as time spent by participants on websites or mobile apps within the last year; information gathering, which includes participants researching projected retirement-income information on the web; and making trade-offs, such as participants exploring different savings rates or rates of return.