1. society
2. work
3. retirement

2015 cupa.hr Mid-West Region
Bernie Heffernon, Sr. VP Distribution Management
Brian Merrick, VP Strategic Relationship Management
John O’Brien, Regional Vice President
Perspective
“If you can’t enjoy the contradictions, you’ll miss out on
all the fun. Don’t insist that everything make sense. If
you attempt to understand human beings, if you expect
them to always behave rationally, then you’ll end up going
through life crabby and vexed. But if instead you can
savor their odd, confounding human-ness, then you might
just enjoy the spectacle that we are.”
- Men’s Health Magazine, November, 2013
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SECTION I
PSYCHOLOGY, LOGIC, LIFE & INVESTING
3
Behavioral Finance
Emotion and inclinations drive actions.
BEHAVIORAL
FINANCE
4
Behaviors to Discuss
I. Hyperbolic Discounting
a) Procrastination
II. Loss Aversion
a) Fear of Poverty
III. Information Overload
IV. Optimism Bias
a) Self/Social Comparison
5
Hyperbolic Discounting
Get something
now…
… at the expense having something else
in the future.
RESULT:
Procrastination.
6
Financial Stress: Delayed Gratification
The Marshmallow Study:
Marshmallow Study
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Procrastination
Common excuses to put off saving for
retirement:
• When I get a raise
• Retirement is too far away
• A few weeks or days, or even
•
•
•
•
8
a year won’t make much
difference
I’ll catch up later
I’ll sign up when I have time
I can’t afford it right now
I’m too busy
Feelings About Investment Amount
42%
I am happy with the amount I am
currently investing
28%
34%
Non-faculty
Faculty
Total
58%
I would like to be investing more than I
currently am
72%
66%
Source: ING Study: Lessons Learned in Higher Education, February 2012
9
Price of Procrastination
The $115,000 Coffee Habit
Hypothetical Tax-Deferred Growth
This chart is hypothetical, not guaranteed and not intended to reflect the performance of any particular investment. It reflects the growth potential
of an investment of $60 per month for 40 years, at 6% average annual return. If the investment were made in a tax-deferred vehicle such as an
employer’s 401(k), 403(b) or 457 plan taxes would be due upon withdrawal at the investor’s current tax rate. The illustration does not reflect any
of the charges or expenses that are generally associated with an employer's defined contribution plan which would lower the results. Systematic
investing does not ensure a profit nor guarantee against loss. Investors should consider their financial ability to continue their purchases through
up as well as down market conditions..
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Loss Aversion
The fear of losing:
•
•
•
•
•
•
•
•
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Family
Friends
Health
Home
Physical attributes
Status
Possessions
Freedom
The fear of poverty
12
Information Overload
“The amount of information a human being
consumed in the 18th century in his whole life –
is the same as a week of information in a regular newspaper.”
“Evolution and Information Overload,” wordpress.com, Design / Marketing / Philosophy, March 27, 2010
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Financial Stress
To quote a famous philosopher:
“I got too much month for
the end of my money, and
not enough money for the
end of the month.”
-G. Love and the Special Sauce
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Financial Stress
How financial stress can affect your employees?
Unhealthy Coping Behaviours
Less Money for Self-Care
Lost Sleep
Unhealthy Emotions
Anything that can take a worker’s mind off financial problems improves
focus on the work at hand.
15
Workplace Productivity
Money and finances clearly play a role in today’s workplace
Financial concerns can be a workplace distraction
Approximately 83% of workers express they spend at least
some time every week, at work, thinking about personal
finances.
34%
Spend five or
more hours, each week,
at work, preoccupied with
personal finances.
Number of Hours Per Week, At Work, Thinking About Personal Finances
Source: Redefining Retirement Readiness White Paper, Voya Retirement Research Institute, June 2012
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SECTION II
USING BEHAVIORAL FINANCE TO
CHANGE BEHAVIOR
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Using Behavioral Finance to
Change Behavior
How can this
knowledge of human bias,
behavior and impulses
help us to encourage consumers to take action to build a
more secure retirement for themselves?
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Information Design / Choice Architecture
Helping investors navigate
information, options and decisions
•
•
•
•
19
Design
Information Layering
Plain English
Choice presentation
Asset-allocated investment options
Removes the burdens of information
and choice overload
 Managed Accounts
 Target Date Funds*
 Asset Allocation funds
*Investments in target date funds are subject to the risks
of their underlying funds. The year in the fund name refers
to the approximate year (the target date) when an investor
in the fund would retire and leave the work force.
Generally speaking, the fund will gradually shift its
emphasis from more aggressive investments to more
conservative ones based on its target date. An investment
in a target date fund is not guaranteed at any time,
including on or after the target date.
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Tools and engagement devices
Enable positive saving action
 Risk assessment tools
 Calculators
 Online education and
account access
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Today’s Workers; Labels & Lifestyles
Mature
Baby Boomer
Generation X
Generation Y /
Millennial
Born before 1946
Born 1946-1964
Born 1965-1979
Born 1980-2000
Retirement Age
Pre-retiree/Retiree
Mid-career
Just starting out
2
Communication Styles
Generation
Mature
Baby Boomer
Generation X
Generation Y / Millennial
Interactive Style
• Individual
• Team player
• Loves to have meetings
• Entrepreneur
• Participative
Work is
• An obligation
• An exciting adventure
• An obligation (older
Boomers)
• A difficult challenge
• A contract
• A means to an end
• Fulfillment
Communication
• Formal channels
• Written memo
• In person
• Direct
• Immediate
• E-mail / On-line / Social
• Voice Mail
Retirement
Strategies and
Tactics
• Regular mail or work flyer
• On-site seminars
• Individual consultation
with age-appropriate tools
and advice
•
•
•
•
Workplace e-mail
Retirement seminars
On-site advisors
Holistic financial planning
• (Workplace) E-mail
immediacy
• Empowering / actionable
on line tools
• Enable self-help and
action
• Workplace email
• Peer comparison
• Leverage social media &
communities
• Electronically engage
• Empowering / actionable on
line tools
• Enable self-help and action
Sample Themes
and Messages
• It’s YOUR Time…
• Let’s Get You to the Next
Step!
• Your Future is Calling
• Your Future, Your Choice.
• Act now… tomorrow
depends on it.
• Living for today… what
about tomorrow?
• XX% of your peers have
done it…
• Retirement? Seriously? Yes.
Later or Much Later… Your
Call.
Educational tools
Transform the way employees manage, engage, and interact with
their retirement accounts
Monthly Income
Focus on what matters most
Own their Experience
Gain control of their financial lives
A Journey to Financial Freedom
Greater emotional and economic security
Individuals are shouldering more responsibility than ever before for building and eventually
generating retirement income. At the same time, we know many are seeking greater
support and resources so they can feel empowered, optimistic and secure about their
future. In this environment, planning for and understanding retirement income is incredibly
important for achieving a positive outcome — and it’s something many are not accustomed to
doing. -Voya Financial CEO
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SECTION III
THE PERSONAL APPROACH
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The Personal Approach
Have you spent time working with a financial advisor to discuss your
investments or plan your financial future?*
Source: “Working with an Advisor: Improved Retirement Savings, Financial Knowledge and Retirement Confidence!”
ING North America Insurance Corporation, © 2010
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The Personal Approach (cont)
People who spend time with an advisor have more saved for retirement
3x
2x
1.5x
Spent time
with advisor?
No
Yes, but only
once or twice
Yes, some time
Yes, a lot
of time
Source: “Working with an Advisor: Improved Retirement Savings, Financial Knowledge and Retirement Confidence!”
ING North America Insurance Corporation, © 2010
27
The Personal Approach (cont)
People who spend time with an advisor are more likely to be moderate
investors *
People who spend less
time with a financial
advisor are more likely to
be conservative investors
People who spend more
time with a financial
advisor are more likely to
be moderate investors
There is little difference
in aggressive investors
Source: “Working with an Advisor: Improved Retirement Savings, Financial Knowledge and Retirement Confidence!”
ING North America Insurance Corporation, © 2010
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The Personal Approach (cont)
Those with an advisor feel confident about retirement
Confident About Enjoying Retirement
Those who answered “very confident” or “extremely confident”
62%
50%
34%
No
39%
Yes, but only
once or twice
Yes, some time
Yes, a lot
of time
Source: “Working with an Advisor: Improved Retirement Savings, Financial Knowledge and Retirement Confidence!”
ING North America Insurance Corporation, © 2010
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Employer Plan Contribution
30
Employer Plan Account Balance
31
Confident and In Control Investors
32
Confident and In Control Investors
33
Discretionary Income
34
Financial Goal Status
35
“Consulting a financial advisor produces
higher utilization and “better” participation in
employer sponsored retirement savings plan”
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