RETIREMENT FUND COMMUNICATION

Dave Crawford CFP ®Crawford Employee Financial Guidance

“THE GREATEST PROBLEM WITH COMMUNICATION IS THE ASSUMPTION

THAT IT HAS TAKEN PLACE.”

GEORGE BERNARD SHAW

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WHY DO FUNDS COMMUNICATE TO MEMBERS?

TO PROVIDE THEM WITH THE INFORMATION THAT THEY NEED TO

PLAN AND ACHIEVE A DECENT RETIREMENT?

Statutory requirements notwithstanding!

Statutory requirements notwithstanding!

HOW EFFECTIVE CAN COMMUNICATION BE IF IT IS MADE TO PEOPLE WHO LACK A BASIC GRASP OF

THE SUBJECT?

THIS SUGGESTS THAT LINKING FUND MEMBER COMMUNICATION WITH EDUCATION MAY BE MORE IMPORTANT THAN IS GENERALLY

REALISED!

“The process workers should utilize in determining their retirement income needs and funding requirements is essentially the same as that used by large defined benefit plans in determining their liabilities and contribution requirements.  

IN 2001 RICHARD GLASS WROTE IN THE US

RICHARD GLASS CONTINUED

Unfortunately, the average worker is ill-prepared to take on this task. To make matters worse, he or she is unfamiliar with the magnitude (or even the nature)* of the problem.”

*MY COMMENT

HOW DOES ONE ENGAGE EMPLOYEES?

THAT IS THE $64,000 DOLLAR QUESTION

IT STARTS WITH COMMITMENT FROM THE TOP

• Retirement benefits need to be identified as part of the reward structure

• Communication and education need to be synchronised

• Information supplied to members must be useful to them

• Members need to understand financial planning basics

WHOSE MONEY IS IT AFTER ALL?

Group Age Description Approach

Appie Up to 30

Not interested in retirement. Into consumption, wealth creation and investment miracles

Presentations on wealth creation Encourage compound interest calculation to get them started. Offer reading material! 

Yuppie 31 to 45

Starting to sweat the responsibilities of house family and understanding the rudiments of retirement but putting off till later.

Offer reading material, interesting talks on investment and attendance at workshops. Difficult because they are stretched but not sufficiently motivated to save more than the fund.

Serious 46 to 57

Aware of position in the company. Not going to crack MD. Worried about school, university expenses and a decent retirement.

Work shops, reading material, one on one sessions. Groups need to save as much as they can and pay attention to their asset allocation because they are encouraged to invest conservatively by most advisors when the opposite may apply.Resigne

d58 plus

Retrenchment fodder. Vulnerable to scams and keen to do much in the time left.

Retirement Fund Member Life Cycle

Employee joins Scripted interview 1 with HR Officer Scripted interview 2 with HR Officer

Delivery promises Introduction to Funds Benefits explained Comparison of benefits Comparison of risks Explanation of choices Request for a fund choice Request for beneficiary nomination

Confirmation of fund choice Confirmation of fund membership Confirmation of investment choices Confirmation of beneficiary/ ies Handling queries

Ongoing membership 40 to 55 55 plus

Portfolio switches

Beneficiary changes etc.

Voluntary Required

Attendance at retirement awareness workshops

From 6 months prior to retirement

Death

Disablement

Resignation

Retrenchment

Scripted interviews With HR Manager

Individual counselling where necessary

Retirement preparation with spouse workshops and/ or Individual counselling/ coaching

Benefit statements..

Exit

To 40

Voluntary

HR Staff training in retirement benefits

Queries etc..

Induction pack

Informing members and being guided by their feedback will create a vibrant,

responsive communication environment from which employer and employee will benefit hugely.

FEEDBACK LOOP

HOW DO YOU DO A COST BENEFIT ANALYSIS?

Not everything that can be counted counts, and not everything that

counts can be counted.

Albert Einstein

Campaigns are usually evaluated on a cost per head basis

The benefit of a well informed workforce makes this work a true value add.

Member’s needs don’t differ much between free-standing and umbrella

retirement fundsHowever communication and education tend to be supplied very differently in

the two cases

Communication and Education in Free-Standing Funds

• Employer management is often actively engaged with fund• Trustees close to members – strong sense of representation• Queries usually quick to be answered• Members like proximity of trustees as a basis of trust• Members feel a sense of ownership of “our” fund• Member communications employer centred and specific• Members less widely distributed

Communication and Education in Umbrella Funds

• Employer management often not actively engaged with fund• Trustees not close to members – less sense of

representation• Queries often not quick to be answered• Trustees’ distance a source of mistrust• Members feel little sense of ownership of “that” fund• Member communications not employer centred and less

specific• Members widely distributed

Communication and Education in both Fund types

There are advantages and disadvantages in both forms of fund

If employers are supportive members of either type of fund can be adequately looked after. The great challenge is to get the buy in from senior management, to proper education and supporting communication as opposed to purely income generating activity from sales organisations.

TO SUM UP

1. FORMAL RETIREMENT FUNDS ARE PART OF THE RETIREMENT PROCESS NOT ALL OF IT!

2. MEMBERS DO NOT UNDERSTAND THE PROCESS AS A GENERAL RULE!

3. CO-ORDINATED COMMUNICATION AND EDUCATION WILL ENSURE THAT FUNDS HAVE A MUCH GREATER EFFECT IN HELPING MEMBERS HAVE BETTER RETIREMENT PROSPECTS!

Thank you