Digital fiduciary overview: overseeing retirement plans in the digital age

Employees are making important financial decisions on digital devices, including those that affect their retirement. Research from the Voya Behavioral Finance Institute for Innovation shows that the design of these screens—how the choices and information are presented—can dramatically impact the way workers save.

 

“In an age when many individuals are making important financial decisions on their digital devices, research tells us that the design of screens — how information and choices are presented — can dramatically impact the way workers save. Because digital design can have a strong influence on long-term results, it is important to use design elements that support a plan sponsor’s ultimate goal of helping  their employees achieve a secure financial future.”

Charlie Nelson, CEO of Retirement and Employee Benefits, Voya Financial

 

Importance of digital design on retirement outcomes

  • Enhancing the design of the enrollment website increased the number of workers who personalized their enrollment by 15 percent, and led to an overall increase in employee contributions of roughly 10 percent.1
  • There is an opportunity for employers to double and triple the most commonly suggested default savings rate (3 percent) without reducing enrollment. These higher suggested rates lead to meaningful improvements in the financial security of participants.2
  • Diversification can be driven by the number of blank lines on a retirement plan website; as more lines lead participants to invest in more funds.3

What is the “digital fiduciary” concept?

The Voya Behavioral Finance Institute for Innovation, in it’s latest whitepaper The Digital FiduciaryTM: Overseeing Retirement Plans in the Digital Age, introduces the concept of “digital fiduciary” along with seven actionable steps employers can take to improve retirement outcomes for employees. Although there is no explicit duty to become a digital fiduciary under ERISA, these principles and best practices are becoming an important part of effective retirement plan management in the 21st century.

According to the whitepaper, given the potential influence of digital design on retirement savings choices, plan sponsors should consider bringing the same oversight and diligence to their retirement plan’s digital platforms that they currently bring to plan design and investment menu selection.  Whitepaper author Shlomo Benartzi, UCLA Professor and Senior Academic Advisor at the Voya Behavioral Finance Institute for Innovation, believes that this can enhance financial security for employees while potentially minimizing the legal liability associated with providing a retirement plan.

Based on this research, we believe that retirement plan sponsors and providers should explore this concept, and invite you to take a deeper dive into the topic:  

 

For a sample Digital Policy Statement, or more information, talk to your Voya Representative.

 

 

 

 

 

 

 

 

 

 

 


Disclosures: 
1 Saurabh Bhargava and Lynn Conell-Price of Carnegie Mellon University; Richard T. Mason of City, University of London and Voya Financial; and Shlomo Benartzi of University of California at Los Angeles. "Save(d) by Design,” October 2018. 2 John Beshears of Harvard University and NBER; Shlomo Benartzi of University of California, Los Angeles; Richard T. Mason of City, University of London and Voya Financial; and Katherine L. Milkman of University of Pennsylvania. "How Do Consumers Respond When Default Options Push the Envelope?” October 2017. 3 Benartzi, Shlomo, and Richard H. Thaler. "Heuristics and biases in retirement savings behavior." The Journal of Economic Perspectives (2007): 81-104. Products and services offered through the Voya Financial family of companies.
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