We continue to hear the news about the lack of financial preparedness among Americans. Needless to say, financial independence simply won't be an option for many. According to the Employee Benefit Research Institute, 30% of workers reported that they had less than $1,000 in savings and investments in a 2012 study. And, nearly 75% of retirees have not saved enough according to the Health and Retirement Study – and those retirees say they would save more for retirement income if they could do it all over again.
It’s easy to admonish the masses. After all, financial marketing is not to blame, right? You’ve populated your website with financial calculators, you’ve held a retirement savings webinar/seminar, and you’ve offered a free financial check up to anyone who would just take the initiative to work on their financial independence.
Really? That’s what you got?
I’ve heard people in this industry say, “Well, we can’t force them to be more responsible.” Do you know what your prospects are thinking about you and your institution? They are thinking that you are difficult and boring. And they’ve been so beaten down by trying to fit into your paradigm of how the process should go that they’ve all but given up. You can almost hear them saying, “Well, I can’t force them to be more interesting and relevant to the way I think and live my life.”
So before we take the easy road of chalking it up to laziness and apathy, let’s take a look at what we could do to make the idea of retirement savings more enticing.
Make the gratification immediate.
People will spend more time planning a five-day vacation than planning their 25-year retirement. Don’t cop out by saying, “Yeah, well vacations are fun.” The reason they get excited is because they can envision themselves on that vacation in just a few short months. Our challenge is to help them connect their actions today (financial responsibility) with the reward of tomorrow. It’s not going to be easy. But it should be at the top of our list.
Keep it about choices and options.
We hear people say, “I guess I’ll have to work until I can’t work anymore.” Sure, they may not be prepared for the sailboating-beach-home-owning-vineyard-tending vacation portrayed in the retirement brochures of a few years back. But they will most likely have amassed enough to afford themselves some options. Maybe it’s having more choice about when and how they work. That's not the financial independence message. But by focusing on the choices and options, you can impart a sense of control that these folks yearn for.
Be careful with big dreams.
If you put too much emphasis on dreaming, it could backfire. People may feel guilty about not being well prepared for the future and may feel like they don’t deserve to dream. Or worse yet, they may feel like any dream they have will end in disappointment. It’s okay to encourage dreaming. Just make sure it’s realistic.
Make it interactive.
Engage people by allowing them to tinker. Think interactive app with sliders that allow users to explore different scenarios. It can be very empowering to see the relationship between possibilities and ramifications, and then fine-tune a plan of attack.
Don't answer their questions with more questions.
Here’s the scenario. A client asks, “Will I be able to retire?” And the advisor asks, “What kind of retirement do you envision.” Ugh. Honestly, the majority of folks simply don’t know. And as we've said, complete financial independence may not be in the cards. Many are just trying to make it through the day, paying bills and hoping to set something aside for college and, hopefully, set aside some retirement savings. When an advisor answers their question with a question, they do nothing but frustrate the prospect. A better approach would be to model personas. Let them see what’s possible for somebody in roughly their same situation. This benchmarking can be very energizing for someone who is overwhelmed by it all.
They have had hope pounded out of them. They need someone who is excited about possibilities they may not realize that they have. More importantly, they know it will be hard. And they will have moments when they feel like they are failing. They need someone who can help them adjust and let them know that there are still exciting possibilities ahead.
This list is just a start for making retirement savings more seductive. Let’s see what else we can add. Let’s really try to understand human nature. Let’s stop thinking solely in terms of financial independence. Let's not force people into a way of thinking or a process that a financial institution has deemed as the right way to approach planning for the future. Let’s make it relevant to their lives. And deliver it in a way that is tangible, engaging, and exciting. What else you got?