Retirement plan participants don’t appreciate the jargon commonly used in the industry, according to an Empower Institute report.
Nearly two-thirds, or 61%, of Generation Z and slightly more than half, or 52%, of millennial plan participants surveyed for the report said financial terms make them hesitant to talk about money.
Older plan participants — 43% of Generation X and one in three baby boomers surveyed — also feel trepidation when they encounter jargon.
The Empower Institute report is based on an analysis of three surveys and one focus group conducted by market research and analytics company Harris Poll from 2017 to 2021. A total of 5,030 Americans aged 21 and up participated in the surveys and focus group — with at least 72% of those surveyed participating in their employers’ retirement plans.
Empower Institute is a research group within Empower Retirement, a retirement plan recordkeeping financial holding company.
The use of jargon makes it harder for plan participants to understand what advisors are communicating and makes participants less interested in engaging, the Empower Institute report notes, citing research published in 2020 by two Ohio State University researchers.
When plan participants were asked how they perceive retirement plan communications, the responses included “wordy/long/verbose,” “confusing,” and “overwhelming.”
Instead, the respondents want to see everyday words used in a financial context.
Plan participants find common industry terms — such as asset allocation, account aggregation and robo-advice — difficult to understand, according to the report.
It doesn’t take much to communicate clearly: for example, respondents found employer match much easier to understand than match, and retirement income was preferred over retirement paycheck.
Although certain terms were preferred by more plan participants, others had different preferences, and that’s important to note when communicating with individual participants, according to Empower Institute.
Empower Institute recommends, meanwhile, that employers keep the following three steps in mind when communicating with plan participants:
- Focus on simplicity. Use clear, direct language. If you must use technical terms, explain them in simple terms. Be consistent with word choice — don’t use terms interchangeably.
- Know your audience: Tailor your approach to the person’s age, cultural background and other traits.
- Choose the right channel: Use the communication channel your audience prefers.
Do you have a news tip you’d like to share with FA-IQ? Email us at email@example.com.