The gender factor. How to engage and motivate women in retirement plans. Lincoln Retirement Power Participant Engagement

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1 The gender factor How to engage and motivate women in retirement plans Study Lincoln Retirement Power Participant Engagement RET IREM EN T P L A N S ERV I C ES

2 How do women participants make decisions and take action in their employer-sponsored retirement plans? That question is the focus of our latest analysis of the Lincoln Retirement Power Participant Engagement Study. Through this analysis, we explore how women think about retirement, what women do in their retirement plans, and when women engage in the retirement planning process. Here s a synopsis of the key findings and what they may mean for our industry. Key findings 1 When saving for retirement, hope and fear influence women more than men. Researchers asked: What influences women when they make a decision about how much money to contribute to their retirement plan or how to invest? Hope, fear, facts, and experience all play a role. But as you can see here, emotional influencers hope and fear are more powerful for women than they are for men. Q: When you make a decision about how much money to contribute to your retirement plan or how to invest, to what extent do you think you re influenced by the following: Emotional influencers 91% 85% 73% 59% Intellectual influencers 82% 90% 72% 78% The study also shows that women are more concerned than they are optimistic about retirement issues, such as: Paying for day-to-day expenses Converting savings to retirement income Maintaining lifestyle in retirement Saving enough to retire on Since emotion clearly influences how women save and where they invest, it would be wrong to focus only on intellectual influencers. To engage women, retirement plan providers and sponsors can be empathetic to investment-related fears and concerns, while helping turn hopes into specific investment goals. Avoid fear appeals, and instead focus on optimistic, action-oriented messages. Hope Fear Hard facts Previous experience % answering somewhat or a great deal Women Men 1

3 2 Some women take charge of retirement planning, but many avoid it. Decision-making is one of the primary areas of focus for the study. Using a combination of several questions in the survey, researchers identified four types of decision-makers. Each participant falls into one of these four types: The advice-seeker uses all available resources, works with a financial advisor, often has savings outside the plan, and feels the most optimistic and confident, with good reason. This is the type who tends to have the most saved for retirement. The fact-finder is influenced by hard facts and numbers, prefers model portfolios, doesn t seek opinions, and feels optimistic as well as anxious. The instinct-follower is independent-minded, doesn t rely on outside info, doesn t seek opinions, but does feel optimistic and confident about the future. The decision-avoider consults a wide variety of sources, fears losing money, takes a long time to arrive at a decision, and feels anxious, overwhelmed, and scared about the future. Most participants (both male and female) are decision-avoiders. In contrast, very few are adviceseekers. Among women particularly, there are more decision-avoiders and fewer instinct-followers and fact-finders than among men. Our research team identified these four decision-making styles based on responses to multiple questions. 11% 10% 24% 29% 26% 28% 39% 32% Women s avoidance may influence how they invest: Compared to men, women are significantly less likely to invest in stocks or mutual funds (56% women vs. 73% men), and more likely to invest in money market funds (48% women vs. 43% men). We also see some generational differences. Younger generations of women are more likely to be decision-avoiders, while boomer women are more likely to seek advice. Decision-avoiders don t have to be hesitant forever. As they near retirement with our help they can become more informed, more open to seeking advice, and more capable of taking positive actions with their retirement savings. 3 Very few women are fully engaged, possibly because they rely on their partners. Along with decision-making, engagement is another area of focus for us. Our research team identified engagement levels based on answers to multiple questions throughout the survey. (In other words, they didn t just ask, Are you engaged with your plan? ) They segmented participants into five categories, ranging from fully disengaged to fully engaged. Using this methodology, they found the majority of women (73%) are disengaged or on the fence. Engagement level % women % men Engaged 27% 37% On the fence 27% 26% Advice-seeker Fact-finder Instinct-follower Decision-avoider % total Women Men Disengaged 46% 37% 2

4 As the graph below shows, low engagement could be the result of relying on a partner to be more involved with retirement planning. Among those who are married or living with partners, only 35% of women say they are the primary decision-maker when it comes to saving, compared to 53% of their male counterparts. The data may suggest a disconnect: Some women think they re sharing the decision-making, but their partners claim to be in charge. Virtually no man or woman (2% each) will say their partner is the decision-maker. Q: Who is the decision-maker in your household when it comes to savings and investments? 35% 53% 60% 43% 4 In-person communication is the #1 choice to engage women for retirement. To understand how we might better engage women, researchers asked two things: 1. How would you like to receive information to help you make decisions? 2. Which methods would motivate you to make positive changes in your retirement plans? In both cases, the majority of women prefer in-person, face-to-face communication. Ideally, they d like to be one-on-one, but they re also interested in group sessions. They want to be able to see, hear from, and ask questions of a person who is qualified and knowledgeable about retirement planning. Q1: To receive information to help make a decision, which methods would you prefer? Q2: Which methods would best motivate you to make positive changes in your plan? You Shared fairly equally 2% 2% 3% 2% Your partner Each responsible for his/her own 57% 70% % married or living with a partner Women Men Information for decision Motivation to make changes Engagement is a personal experience. Put the person the woman, the man, the participant first in your retirement plan efforts, and you can tap into the formula for better retirement outcomes. Do this by demonstrating how your plan s capabilities align to real needs by addressing participants concerns and helping them achieve their goals. If possible, offer couples planning seminars and other tools to help engage women and their partners. % women selecting in-person 1 as first or second choice 1 In-person includes both one-on-one and group meetings. 3

5 What does this finding mean in the context of the rest of the study? Relationships and interpersonal dialogue may help women overcome the hesitation that s holding them back from taking action in their retirement plans. Rather than relying solely on their partners, women would be willing to partner with a financial professional. We recognize that most women can t be fully engaged in their retirement plans all of the time. Therefore, we need to turn women s engaged moments into quality time by making those interactions more personal, appealing to emotional needs, and helping women get on track faster with support and streamlined processes. Personal guidance can help meet all these needs. Q: In general, if someone were to provide you with information to help you make a decision about an investment, how would you prefer to receive it? One-on-one meeting Group meeting 13% 27% 27% Telephone 31% 40% Website Mail 46% % women selecting first or second choice In-person 5 All communications with women can support a more personal experience. Taking a closer look at the two questions that made up the previous graph, one had to do with motivation and one with action. The first question asked how women would prefer to receive information to make decisions. One-on-one and group meetings combined put in-person communication at the top of the list. However, additional tools such as , web content, direct mail and phone-based resources can help too. We feel it s important to make all of these tools available in such a way that they feel more personal, to enhance (not replace) the in-person experience. Women may want to feel they have a personal relationship with their retirement plan, their employer, and their provider. Considering that this question has to do with decision-making, we think all of these tools can help overcome women s tendency to be decision-avoiders. We also note that women are more likely to use social media 1 and we believe they ll benefit by connecting with their providers and advisers in a virtual social environment especially if they can t do so in person. 1 The Demographics of Social Media Users, Pew Internet, February 14,

6 Second, researchers asked women what would motivate them to make changes in how much money they contribute or how they invest. As we ve seen, women prefer in-person, face-to-face communication which includes both one-on-one and group meetings. But, as the graph below shows, in-person communication doesn t preclude other options, such as: Calculators and worksheets Model portfolios Website Each of these tools can be used as a conversationstarter, or as a follow-up to in-person meetings. Q: Which of the following methods would best motivate you to make positive changes in how much money to contribute to your retirement plan or how to invest the money? One-on-one meeting Group meeting 17% 15% 22% 30% Website 39% 51% Calculators or worksheets Model portfolios In-person % women selecting first or second choice We believe the key to engagement is putting the personal experience at the center of the participant experience, and using other communications channels and tools to help support that model. 5

7 Recommendations Our participant strategy centers on exceptional personal service. We re committed to helping women manage emotional influencers, streamline decision-making, and take charge so they can get on track and get back to their other daily priorities. Therefore, we recommend taking a personal approach to communication and education, especially with women participants. Here are some specific actions you can take Engage with a multifaceted approach for a dynamic segment. Although women can be grouped together by gender, decision-making style, engagement level, or other characteristics, no two are the same. We can t take a single approach and expect it to work for everyone. Instead, help each woman understand that regardless of her situation, there is a pathway to retirement for her through appropriate investment options, tools and educational offerings every step of the way. Offer in-person guidance, particularly one-on-one if possible. We ve found that our entire communication and education program runs more smoothly and effectively with professional, personable representatives guiding the way. The in-person experience can help participants optimize their use of plan-related tools. And there s no greater motivator for a decision-avoider than a trusted, competent professional. Deliver outcomes-focused communication and de-emphasize process-focused communication. This means it s time to shift the focus of communications and educational material from the mechanical or technical to the personal elements of planning for retirement. For example, help participants define where they want to go and how to get there (i.e., future retirement goals and needs), rather than overwhelming them with details about glide paths and investment boxes. After all, they re future retirees, not future money managers. Provide straightforward choices. Women participants are influenced by several factors and try to synthesize a lot of information when making retirement decisions all while balancing other daily priorities. They ll appreciate anything that simplifies the decision-making process when it comes to investment options. Help women bucket the available investments into meaningful categories, to narrow down the universe of options to the funds or strategies that best suit them. Consider automatic features. The most difficult decisions getting in the plan, deciding how much to save, and selecting investments can be real barriers, particularly to decision-avoiders. Auto features can help overcome those barriers and get people started in the right direction. While all of these recommendations address challenges facing women participants, they all apply to both genders. We are optimistic that this study of women can help spark positive change for all retirement savers. 6

8 Additional information Lincoln Retirement Power Participant Engagement Study methodology Survey of 2,530 participants, fielded in late 2012 and published in 2013 Data weighted to represent U.S. population Conducted by Mathew Greenwald & Associates, Inc. Study to be released in waves, published throughout 2013 Findings to include analysis by gender and other factors Lincoln Retirement Power program We believe research should empower decision-makers to take positive actions. Established in 2010, the Lincoln Retirement Power program is our platform for research and viewpoints on central issues related to retirement planning. Through the program, we seek to identify forward-thinking ways to help plan sponsors drive better retirement outcomes. As part of the program, we sponsor both proprietary and third party research with a focus on what drives better retirement outcomes. We re focused on how we, as an industry, can move forward through: legislation, product innovation, participant strategies, and other means Lincoln National Corporation Lincoln Financial Group 150 N. Radnor-Chester Road Radnor, PA To learn more about the Lincoln Retirement Power program, visit LincolnFinancial.com/RetirementPower. LincolnFinancial.com Login: Employer Retirement Plans Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations. LCN POD 4/13 Z02 Order code: DC-WOM-BRC001