Engaging Participants to Solve Asset Retention and Margin Compression Issues

Engaging Participants to Solve Asset Retention and Margin Compression Issues

Institutional wealth management businesses (401(k), 457, 403(b), 529, stock plans, etc.) contain significant assets but are often only seen as recordkeeping / service-based businesses by senior management. For a variety of reasons, many are ignoring vast untapped potential. One such obstacle is an increasingly competitive and transparent market. Certainly, some providers do not have these issues (or are so large it doesn’t matter), but latent opportunities for increasing assets beyond in the institutional relationship are huge; and they’re often lying just below the surface.   

–The key to unlocking that potential is connecting with participants, using more cost-efficient channels to build the relationship, and delivering higher- touch targeted communication when they need it most. This creates a strong association between the participant and the brand; vastly increases the odds that you will retain their assets when they change jobs or retire; and opens the door for a broader relationship outside the plan. And while it’s not easy, it’s also not impossible. It requires targeted education and communication to the right participants at the right time.  If Amazon can predict what books, music, and movies you will like – these goals can all be achieved.

To capitalize on the opportunity, management teams need to stop thinking as record keepers and treating every participant as a number.  These are real people with real financial needs – namely, they require help planning for their future and retirement. Participants need to feel like the company that holds their most important savings account cares about them. If not, participants can and will look to other institutions for this guidance, and they’ll take their assets with them. With the right education and communication tactics in place our clients have seen large increases in assets under management, driven by increased contributions and asset retention at retirement.  

Targeted engagement and education programs are the key to meaningful participant engagement.  These are conducted through addressable tactics that can be presented to specific individuals regardless of channel, such as direct mail, email, addressable display (both owned and open web), social, landing pages, newsletters, and personalized website experiences (both pre & post log in).


Triangulating on the perfect participant targets – Data Append, Selection & Modeling

Goals vary by type of business, but in defined contribution plans, roll-ins/IRAs, contribution increases, and asset retention at job change or retirement are important drivers of performance. The service experience associated with excellent education programs can also help win more RFPs and improve service and plan retention. For stock plans, converting participants into wealth management / brokerage account holders is the main goal.  But here too, great communication and education programs can help with plan sponsor acquisition and retention. 

Establishing both short-term and long-terms goals will be important for maintaining focus and senior executive interest in this type of new program. Understanding the assets associated with targetable segments can help set up smart KPIs. Not only is it important to understand your customers’ performance based on first-party data, you will also need to append additional financial and life-stage data to your participant data to understand the opportunity and develop targetable segments. 

Step 1 – Append your participant data

Gaining insight on the participant base is critical before starting any participant engagement program – step one is enhancing your first-party participant data with third-party data, including lifestyle and behavioral data and detailed wealth and financial data outside the plan. This creates a rich, actionable picture of participants by life stage and wealth level. Understanding this information provides a basis for designing relevant education campaigns and online experiences. It also allows you to route higher-asset participants to call centers that employ more sophisticated representatives.

Step 2 – Develop life-stage and wealth-based segments

Once we have a solid participant profile from the append process and analysis – segment clustering is critical. 

For experience design and education communication experts to build the foundation needed to connect people to the right information and resources at your firm, they must first understand the customer’s life stage and wealth level.  For example, higher net-worth participants should be assigned to different representatives / advisors with appropriate areas of expertise and levels of knowledge.  Please note that we did not just assert that high balance participants should receive this treatment – because plan balance is only a small part of the overall financial picture.    

It is important to select target segments that align with your company value proposition. For example, individuals that have a strong do-it-yourself mindset are good targets for self-directed brokerage, but not wealth management services, as they avoid fees and take their own advice. If you don’t have a good product in this area, then focus on participants that have needs that align with what you have to offer. 

One financial services company was able to separate its lending customers into three distinct groups that allowed differentiated messaging for offers based on those groups. By understanding the life-stage drivers (family composition, spending, and earning velocity), the client was able to create a program that aligns the right message with the right product to the right consumer.

Step 3 – Assess participant lifetime value potential

Finally, the ability to segment prospects and customers into future–value-based groups allows you to align marketing spend to return. Understanding specific tangible behaviors that are discrete, measurable, and build lifetime value (e.g., engagement with web tools, calls into call center, product x-sell) are the first step in building the foundation to an efficient program. Developing a suite of models that predict propensity to respond to an offer or product is integral to developing an engine that allows you to rotate messaging while presenting the participant with the next best message for them.

Although lifetime value (LTV) can seem like an overwhelming task to accomplish, it can be stepped into with increasing degrees of sophistication. Base LTV can be created with some simple knowledge of revenue and expenses at the customer-product level, with just a few months of historical data. However, with most wealth management firms – these are long developing relationships with lengthy consideration and decision-making time frames. So the more historical data you have at your disposal, the better the results.


Combining the principles for an effective marketing plan

To effectively communicate to a participant base, you have to first understand the behaviors and motivators of unique groups within that base. After appending third-party data and segmenting the participant base into unique groups, you must define the customer journey and discrete transactional steps that help move them along that path. However, since those paths are never linear, it’s important to continually test and optimize message and offer timing. One wealth management institution we partner with, which offers college savings solutions, has found that a balanced mix of educational and contribution focused messaging keeps email open rates and contributions increasing. Also, varying messaging to participants has shown positive impact on moving participants to take desired action.

Through LTV modeling, we found that enrolling in automatic contributions was a key driver in moving participants into higher LTV bands. By varying messaging to those who have not contributed in over a year and those not enrolled in automated contributions, we show a strong increase in reactivation and up to 2% increase in automated contribution enrollment.


Troy Ihlanfeldt is Associate Partner, Wealth Management at Merkle

Matt Snow is Analytics Director, Financial Services at Merkle

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