Saving Retirement with an Avatar

Saving Retirement with an Avatar

New technology allows clients to see themselves, literally, as they will be when they're old enough to retire. Research shows it could help investors save more for their golden years.

Cathy Smith has spent months talking about aging — how many wrinkles someone may have when he's 65 years old, the circles under his eyes, even hairlines. No, she's not an expert in plastic surgery. Nor is she a makeup artist. Smith is the co-director at Allianz Global Investor Center for Behavioral Science. And her work? To help Allianz craft a tool that will virtually age investors in moments, in hopes it'll be the push they need to take their retirement plans seriously.

“If it's not convincing, then people will think it's gimmicky, and yet it also has to be done quickly,” says Smith. “But I never thought we would be in a project involved with people's jowls.”

As digital tools become more commonplace in retirement planning, helping reps visualize how a client's financial plans are materializing, a new tool is expected to bring those later years into another kind of focus. Instead of clients seeing their investments mature, Allianz wants investors to see themselves mature as well — in physical terms.

Virtual reality is a tool that many video gamers are familiar with — allowing players to visually morph into another character. It can turn a boy into an ogre, a girl into a wizard, a teacher into a warrior, or a doctor into a blue-haired rock star with elven ears.

This technology has yet to transfer into the investment arena with clients. But the research to support it is there. Three studies from Stanford University, the last in 2010, showed college students who were virtually aged by about 45 years put away more money into a hypothetical retirement account than students who didn't get to meet their older selves.

In the research, 50 college-aged participants were told they'd unexpectedly received $1,000 and were asked to divide the money into four buckets: retirement, a checking account, a nice gift for a friend or loved one, or on a special and expensive outing. Students then donned virtual reality goggles, with a select group shown a version of their 70-year-old selves. Afterwards, they were asked to divide up their money. The results showed that students who virtually met their aged avatars saved twice as much for retirement versus participants who only met their current selves.

“We suspect this will in fact enhance people's savings behavior,” says Hal Hershfield, a co-writer of the study, who was a graduate student when the studies were conducted, and is now an assistant professor with New York University's Stern School of Business in New York. “One of the things that remains to be seen, though, is does it work for everybody. What's the magnitude of the effect? Do they save twice as much or a 2 percent bump? From our perspective, anything that gets them to save a bit more in a smarter way is a big win.”

To Smith, the research sounded like a win as well. In November 2010, Allianz contacted Hershfield and his research partner Dan Goldstein, a professor of marketing at London Business School during the study, to help them build a tool they could license to plan managers and asset managers. Hershfield hopes now to have the virtual tool in the hands of select advisors this summer.

The application would work much like an online aging program — but hopefully with more realistic results. Allianz has teamed with special effects experts known for aging missing children or illustrating the impact from smoking, insistent that the results be accurate and not cartoonish. Advisors would use the tool one-on-one, so that investors aren't placed in a group environment, nor alone at home where they might have a negative reaction to seeing themselves lined and grey, and shut the entire program down.

In a beta test viewed by Registered Rep., there were no goggles to don. Instead an image is taken of the participant, and then an aged version of her face appears on a slider on screen. Move the slider towards saving more money, and the elder self looks pretty contented. In the opposite direction, the face falls into sadness.

“There's been tremendous interest because it literally puts a human face on the whole thing,” says Allianz's Smith.

But is that a good thing? While anything that will get investors to save more often gets a round of applause from registered reps and advisors, to some the idea of turning a camera on their clients and giving them a front-row view of their future selves sounds like it could have the opposite affect, and act as a deterrent.

“My first reaction is I don't know if I want to see that,” says Emilie Goldman, a financial advisor with Tamarind Financial Planning in San Mateo, Calif. “Maybe it works better if you're not so close to retirement. I'm just imagining a woman who is 50 or 60 years old and already sensitive to it.”

Goldman says she already has tried showing clients a not very rosy financial picture of their retirement with their current savings habits, and found it hasn't helped push investors into salting more funds away. And so she's less convinced that viewing a visual version of themselves at retirement age will help, either.

“When I showed them a financial picture, they said, ‘Wow, that was really scary, and I didn't sleep well after that,’” Goldman says. “But it didn't change their behavior.”

Lincoln Financial played with this idea of meeting an older version of yourself in a series of commercials that aired in 2008. In the commercials, an investor meets his future self on a plane. The future self is in great financial shape because he received good financial advice and followed it. The commercials, and the idea, struck enough of a nerve that “Saturday Night Live” mocked this idea with a series of parodies.

“I'm thinking with a 35-year-old woman, that I'm going to show her a hideous picture of herself and she's going to get mad at me,” says Richard Kersting, senior vice president of Gary Goldberg Financial Services in Suffern, N.Y. “And that's going to be a challenge.”

And yet Kersting agrees that life changes can propel clients to make substantive financial decisions. Having a child usually brings up the issue of life insurance, or getting married raises the idea of a down payment for a first home. But pinpointing a retirement trigger can be tricky, as investors are usually juggling other financial concerns, such as saving for a child's college tuition at the same time they should be buckling down for their golden years, says Kersting. There never seems to be the right time.

“A visual of a change in your life might make you move one way,” he says. “But I have clients in walkers in their 70s and a couple who are always on the golf course in their 80s. Everyone ages differently.”

While true, an investor well into retirement is not the age group Hershfield, Goldstein and Allianz are targeting. It's unlikely they'll portray an ailing retired client — but rather one who's satisfied, or one who's feeling overwhelmed by inadequate savings. Even now, to craft the images on the virtual avatar that will appear on the slider, both Hershfield and Goldstein are interviewing financial advisors and retirement investors to find out what feels satisfying to them in terms of their level of wealth in retirement.

“We're not really concerned about happiness, but about adequacy,” says Goldstein, currently a principal research scientist at Yahoo in New York, who gave a TED talk in late 2011 on the battle between the present and future self, with a slight emphasis on the financial outcome. “We're not sure what people answer when they answer how happy they are. You may have a policy of answering questions optimistically. You may ask them if the money they have is adequate for their medical expenses, and they could answer, ‘No, but I'm happy.’ So we want to find what is adequate for food, medical, housing, vacation, education and family.”

Calibrating those expressions to the amount a person would need for retirement is as important to the team as getting the facial imaging right. Marry both, and Allianz believes it will have a tool that will impact an investor's behavior just enough to prepare well for retirement. Do it wrong and Smith agrees that the outcome could scare investors off from even tackling their future needs.

But while no one is eager to face their elder selves in the mirror — whatever the age — a gentle push in that direction may be a wake-up call that many investors need. And coming face-to-face with the future may make investors feel more connected and empathetic to their older selves, says Smith, who notes that the brain reacts to an older version of the self as it would to a stranger. Give the retired self a face, and he may become a friend.

“You think of this person you'll be in the future as a stranger,” she says. “So you're not sure you'll do anything more for yourself than you would for a stranger. We want to introduce you to your future self so you'll be kinder to him or her. That's why it's important that the images be realistic. We're not trying to scare people into action, but to nudge them to want to help their future selves.”

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