The level of trust that consumers have in the financial industry has fallen substantially just since last year, but new indices offer a way to gauge their trust in retirement plan providers and how well they engage with those providers.
In the 2016 Participant Trust and Engagement Study, designed to measure the level of trust that consumers have in financial institutions in general and in their respective retirement plan provider, the National Association of Retirement Plan Participants (NARPP) created three additional indices: the Recordkeeper Engagement Rating, the Recordkeeper Performance Rating, and Participant Financial Courage (the latter measures participants' financial state of mind, including how confident they are in their ability to make financial decisions).
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While the overall level of trust measured in the study dropped from an already-low 13 percent in 2015 to just 8 percent in 2016, the good news—if it is good news—is that trust in recordkeepers was down only two points to 26 percent, from 28 percent in 2015.
In the study also NARPP highlighted "paths to better outcomes." For recordkeepers, it said, the way to increase participant trust in the recordkeeper was in the latter's communication style. The most important factor, it said, is "presenting information to participants in a way that is perceived as being in their best interests."
In addition, recordkeeper trust was higher when information was presented in a way that motivates people to take an action, maintaining a positive message and presenting fee information in a way that is easy to understand and "is linked to feeling comfortable with financial planning for the future."
The study also said that recordkeeper trust can be damaged by "materials containing complicated financial language."
Aside from communications, the report said that recordkeepers can build trust by helping participants have an optimistic view of the future—by showing them a practical and feasible path to retirement in a measured way, and helping them to feel comfortable with the retirement planning process. The study said, "Unfortunately, online tools and calculators have not yet proven to be effective in this regard."
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