For decades, the retirement plan industry has focused on educating employees, with the hope that employees’ newfound knowledge will lead them to adopt all the best financial behaviors. This longstanding belief, that educating employees leads to behavior change, is wrong. Here are some reasons why:

  • Employees’ newfound financial knowledge erodes rapidly, so when it comes time to decide, at best they’ve lost confidence in the right answer
  • The environment that employees find themselves in is doing everything it can to separate them from their hard earned money, and corporations are getting better at this every day
  • We all are inclined to discount long-term benefit in favor of the short term payoff
  • There’s always something more interesting than money to spend time on

We know- none of these will come as surprises.

So if it’s clear that education doesn’t work, what’s holding us back from finding other solutions? For starters, here are two roadblocks:

  1. No Consensus On A Viable Alternative
    Quite literally, financial education is the one and only “go to” for professionals in the financial services industry. It’s almost as if the quote, “The definition of insanity is doing the same thing over and over again, but expecting different results,” does not register for the entire industry. For decades, the retirement plan industry has continued to promote the same broad-based education, hoping that this time the results will be different.Part of the reason that financial professionals have been able to get away with this approach is that they’ve never tracked their impact. Additionally, when an advisor provides online tools or spends time with employees, the employer feels that employees are at least getting something and something is better than nothing. The truth is that the difference between this diminished something and doing nothing is virtually zero [1].  In the vast majority of cases, we’re mistaking activity for progress.
  2. The Cost Of Delivering Personalized Guidance At Scale
    The world of financial technology (FinTech) is littered with companies seeking to “democratize financial guidance” for the mass market consumer. Learnvest and Nestwise are but a couple of examples.The reality is that paying advisors is expensive and doesn’t necessarily pencil out when they have to meet with employees. To make advising or coaching work in the employer context, a couple of things need to happen:

    1. The time that an advisor/coach spends with an employee has to be super efficient. Instead of 30-60 minutes, the interaction needs to be 5-15 minutes and that expectation has to be set up front.
    2. Technology needs to do the heavy lifting in the form of just-in-time automated messages that are multi-channel (e.g. email, text, in-app messages). The advisor/coach only deals with relevant in-bound replies, and even then, the employee inquiries tend to be so easy to answer that a front-office support person can handle 90% of them.
    3. Employees are intelligently segmented so that they get matched with the coach best suited to help them. If an employee has credit card debt, they should be working with a debt counselor who knows how to create and implement a debt management plan, instead of a wealth manager whose expertise is helping rich people invest their money and draft complex estate planning documents.

If you want to see what a system like this looks like in action, you can request a demo of the Retiremap platform here:


[1] Content-based, financial education interventions explain only 0.1% of the variance in financial behaviors. Based on a meta-analysis of 188 research studies,  The Effect of Financial Literacy and Financial Education on Downstream Financial Behaviors, 2014.