Plan Design Blog

How DC Plan Sponsors Can Engage Diverse Participant Personas

February 08, 2022

5 min read

Jennifer DeLong| Managing Director, Head—Defined Contribution; President—AllianceBernstein Trust Company

Heather Balley| Managing Director of Participant Communications—Defined Contribution

Millennials often say their biggest challenge is being lumped into one category, as if everyone’s needs and aspirations are identical. Plan participants have a similar problem of being bucketed too broadly. But just because they share the same retirement plan doesn’t mean their backgrounds—and investment savvy—are homogenous.

Every participant is different. But despite their differences, participants can still be grouped into three personas, according to our research, Inside the Minds of Plan Participants. In fact, based on responses to 14 investment-related statements, three groups have consistently emerged: Capable, Eager and Conservative. We think plan sponsors can boost engagement and confidence by engaging each persona on its distinctive terms (Display).

DC Participant Personas: At a Glance

Defining Three Distinct Investor Personas

The three groups—roughly of equal proportions based on years of surveys—have specific characteristics beyond demographics. Each persona reflects an investment style, learning preference, engagement level, risk profile and other qualities:

Capable – Confident, knowledgeable investors who score high on our financial literacy test and have higher plan account balances
Eager – Younger participants with greater enthusiasm and confidence but lower literacy scores, and—likely because they skew younger—lower account balances
Conservative – Cautious, diligent savers with lower confidence and investing acumen, yet they may know (or need) more than they realize

Stronger Engagement Requires Targeted Outreach

Broad-reaching plan communications are a good start, especially if the messaging is straightforward, uses storytelling visuals and always includes a call to action. But the path to better retirement planning engagement, and outcomes, also requires hands-on messaging.

To engage more deeply with plan participants, connections need high-touch relevance, which is harder to achieve with a wider net. We believe that grouping participants by these distinct investor personas can help plan sponsors discover better ways to connect with participants—communicating and engaging with them on their own terms to foster better long-term results. The idea is to understand participants first to provide more of what they find useful.

Generating retirement confidence and investment knowledge, for example, has been an ongoing challenge for sponsors. The pandemic exacerbated the problem in recent years, but the trend began well beforehand. One reason: the growing use of default options and automated plan features. Although these features are incredibly helpful in many ways, they don’t require ongoing sponsor outreach or proactive participant engagement, which we are finding can lead to surprises down the road. This could explain why a growing number of participants eventually think they won’t hit their retirement income goals, or why retirees look back and wish they saved more.

Even Capable Participants Need Help

Compared with other personas, Capable participants are long-term investors, financial planning enthusiasts and confident decision makers (Display). But even though they’re quite self-reliant, they can still use plan sponsor help.

For example, many Capables may be too aggressively postured in their investment mix and need timely reminders of the potential downside to taking too much risk. Thought-provoking content about the risks and rewards of different investment types or perspective on trending topics, like market volatility challenges or the long-term effects of inflation, can be helpful, too.

CAPABLES: GOOD DECISIONS, THOUGHTFUL APPROACHES

Percentage of Each Persona Group Who Strongly Agree/Agree

Capables self-identify as most knowledgeable, confident and appreciative about investment topics.

Source: AB Research, 2021

Encourage the Eager, But Reinforce Their Need to Plan

Eager participants need more guidance than encouragement. They typically spend more than they save, have the most debt and don’t follow a financial plan compared with other personas (Display). Their confidence tracks moderately high, but more importantly, they demonstrate a sponge-like thirst for financial knowledge. The key is to harness their enthusiasm and competitive drive by showing them ways to “win” at retirement.

Since they skew younger, eager participants probably see retirement as too far off to warrant action today. But they’re also highly malleable, and their tendency to wait can be turned into a positive by demonstrating the advantage of extra time when the right actions are taken today. For example, financial wellness programs focused on paying down debt or following a financial plan can be especially relevant.

EAGERS: HEY, BIG SPENDER! SPEND LESS, SAVE MORE

Percentage of Each Persona Group

Eagers spend much more than they save, and are less likely to follow a plan than other personas. But they’re the most motivated to learn.

Source: AB Research, 2021

Conservative Savers Need a Nudge into More Growth-Friendly Waters

Conservative personas see themselves as savers more than investors. They’re the most averse to market volatility and least likely to lock in a specific investment strategy (Display). They typically stick to less risky, more defensive investments like money market funds to protect their plan balances. And they’re the least retirement confident of the three personas. Though they’re older than Eagers, they have the same average account balance, which is less than half the balance of Capables.

We think many conservative investors are too cautious for their own good, and their low retirement confidence may well stem from a sense that they haven’t saved enough. That’s why they need a nudge into more growth-friendly waters—but need to feel comfortable doing it. This means using relatable examples and tutorials about effective allocation across investment types—especially to those that add growth potential over time, which is still very much on their side.

CONSERVATIVES: WORRY LESS, INVEST BETTER

Percentage of Each Persona Group

Conservatives have the least retirement confidence and most aversity to market swings compared to Capable and Eager personas.

Source: AB Research, 2021

We believe there is a striking correlation between strong participant engagement and improvements in their retirement confidence. Reaching a wide swath of participants through broad outreach efforts is an effective starting point. After all, some participant goals are commonly shared, such as generating retirement income, managing market volatility and staying ahead of inflation. But participants also have distinct differences—hopes, concerns, self-awareness, personal drive, etc.—that should be acknowledged too. For sponsors, understanding what makes their participants tick and building a thoughtful communication strategy around that is the key to unlocking greater participant engagement and, ultimately, outcomes.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.

About the Authors

Jennifer DeLong

Jennifer DeLong is a Senior Vice President, Managing Director and Head of Defined Contribution, responsible for leading AB’s defined contribution business in North America. She oversees product management and development, marketing, participant communications, and client services for the firm’s institutional custom target-date and lifetime income solution clients. Additionally, DeLong is responsible for firm’s Collective Investment Trust business and is President of the AllianceBernstein Trust Company. Since joining AB in 1999, she has held various senior client relationship management, product management and marketing roles, all primarily focused on defined contribution, 529 college savings plans and sub-advisory insurance services for both institutional and retail clients. Before joining the firm, DeLong worked in various sales, marketing and client relationship management roles for both small and mega-sized defined contribution plans. She holds a BS in business management with a minor in international business from The College of New Jersey, as well as FINRA Series 6 and 63 licenses. Location: New York

Heather Balley

Heather Balley is Managing Director of Participant Communications for AB's Defined Contribution business. In this role, she provides defined contribution product content, focused on plan participants, to the firm's Institutional and Retail clients. Balley is also responsible for AB's proprietary research that's focused on plan sponsor and participant behaviors, with special attention to target-date funds, participant engagement and confidence, and financial literacy. She joined AB in 2014 and has over 25 years of experience in financial-services communications and marketing. Prior to joining the firm, Balley held various roles in defined contribution, including positions at PIMCO, Lincoln Financial and Mercer Consulting. She holds a BS in marketing and economics from Lehigh University, and holds FINRA securities registrations 6, 26 and 63. Location: New York

How DC Plan Sponsors Can Engage Diverse Participant Personas

Defining Three Distinct Investor Personas

Stronger Engagement Requires Targeted Outreach

Even Capable Participants Need Help

Encourage the Eager, But Reinforce Their Need to Plan

Conservative Savers Need a Nudge into More Growth-Friendly Waters

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