EMPLOYEE BENEFITS
How empowering member engagement improves financial outcomes BY NASHALIN PORTRAG Head: FundsAtWork, Momentum Corporate
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ember engagement should be instrumental in empowering retirement fund members and creating better financial outcomes. However, bombarding members with masses of complex information simply adds to member confusion and apathy. Retirement funds and their service providers need innovative communication platforms that help members understand and engage with their benefits. Financial advisers are instrumental in encouraging members to use these platforms. Members who connect with their benefits become more financially empowered and are more likely to engage with a financial adviser. This leads to better-informed choices and improved financial outcomes. Effective engagement with employees on their benefits also unlocks significant benefits for employers. Greater engagement around benefits leads to improved understanding and heightened appreciation. Employees feel protected and cared for, which neutralises distracting worries, boosts productivity and results in stronger, more loyal employer relationships.
“It’s particularly important to encourage younger, lower-income earners to engage with their benefits” Effective engagement involves: • Communication that is free of jargon and complexity • Easy access to up-to-date and relevant information when it’s needed • Communication that educates and empowers while it informs • Access through the member’s preferred medium or platform. The acid test is how the engagement makes a member feel. Do they feel relaxed, empowered and better informed to make a decision that works for them; or confused, frustrated and bewildered as they drown in information overload and industry-speak?
31 July 2021
RISK
regardless of age or income. The result was that members often did not understand the information on their static benefit statement, which left them feeling anxious and disconnected. Drawing on this research and considering the digital preferences of younger generations, Momentum Corporate set about creating a new kind of member benefit statement. Their new smart benefit statement gives members real-time information on their retirement and group benefits through any digital device – mobile phone, computer or tablet. A significant number of FundsAtWork Umbrella funds members received a smart benefit statement in 2020 and read it, giving it a very favourable client experience rating of 4.64 out of 5 stars. Further research conducted by Momentum Corporate in March 2021 found that 75% of participants found the language in the smart benefit statement far simpler and easier to understand than previous terminology. Engaging with younger, less financially literate members The research showed that older members have a better understanding of their benefits and industry terminology than younger members. This is largely due to more years of exposure to their benefits. However, the research showed that the smart benefit statement was exceptionally well received by younger members who are further from retirement and often more passive when it comes to benefit engagement. The research also showed that higherincome earners tend to be more financially literate while lower-income earners are less financially literate. The smart benefit statement, which offers access to relevant educational material and enables younger, lower-income earners to demystify complex terminology or concepts with the tap of a finger, is particularly effective in empowering these members to engage with their benefits. It’s particularly important to encourage younger, lower-income earners to engage with their benefits as this will increase their understanding and financial literacy. As they become empowered to know when to turn to financial advisers and what to ask, they are likely to make better-informed decisions, which ultimately will produce better financial outcomes.
A case study in effective benefit communication The benefit statement is one of the most important ways retirement funds communicate with members. Research by Momentum Corporate in 2018 showed that, in general, members have a basic level of financial literacy and there is a high level of discomfort around industry terminology,
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Helping customers keep their promises to themselves
Jaco van der Merwe, Executive General Manager: Personal Financial Advice, Old Mutual
The lifeline of premium protection cover
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ore than 10 million long-term life insurance policies lapsed in 2020, according to the Association for Savings and Investment South Africa (ASISA). The policy lapses, referred to in the recently released combined annual report from the offices of the Long-Term Insurance Ombudsman and the Short-Term Insurance Ombudsman, are largely attributed to job losses or reduced income related to the COVID-19 lockdowns last year. Cover when they need it most “These are alarming figures, but there is a lesson here. Customers want the comfort of knowing they have cover in place when they need it most. They can avoid the risk of their policies lapsing simply by opting to have premium protection in place when they take out policies,” says Jaco van der Merwe, Executive General Manager for Personal Financial Advice at Old Mutual. The unnerving truth is that during a pandemic such as the one we are currently experiencing, insurance cover has never been more essential. Old Mutual’s claims stats for 2020 reflect a rise of 22% in total claims paid, covering death, illness, disability and retrenchment. In the retrenchment cover category alone, there was a R3m or 30% increase in claims. Within this category, just over a third of claimants were between the ages of 30 and 40, and 76% were male. Premium protection cover offers a guarantee “Unfortunately, when economic times are tough, consumers tend to look for ways to cut their expenditure. Insurance, often seen as a less necessary expense, is one of the first options when it comes to cutting costs. Opting for premium protection cover would guarantee these consumers peace of mind in difficult financial circumstances,” he says. Depending on the kind of premium protection you take out, your premiums will be waived, and cover will continue if you die, become functionally impaired, disabled, or retrenched. In difficult times you also want to ensure that you have premium protection in place for your funeral product, and even temporary relief in the form of a premium holiday. Customers who did not sign up for premium protection cover at the time of taking out their policy can add on this benefit at any time. How to help financially strained customers During times of financial uncertainty, customers are under severe emotional pressure. “This is where the role of a financial adviser becomes critical. Here are some steps to ensure that your customers feel like they have a workable solution,” Van der Merwe says. • Provide a listening ear. Your customers may be feeling overwhelmed by their financial situation. Give them a safe space to sound out where they are financially and look at their budget logically. • Review their financial plan. Discuss how their changed financial circumstances will impact their holistic financial plan. For example, they may need to draw on their emergency savings to tide them through until things improve. • Reframe their perspective in a positive way. This is not just about telling your customer, “It’s okay”. You need to help them put aside their emotions and gain clear perspective. For example, they may be stressed out because they accessed their savings and are now worried about retirement. As their financial adviser, you can remind them of other times when they dealt with financial problems, or of the progress they made to reach their current goals.
“It is only to be expected that life will have certain detours along the way. Against that backdrop, the benefits of premium protection cover far outweigh the additional cost that it may add to the customer’s overall premium. You can’t put a price on the peace of mind you gain knowing that your family will be financially provided for or your financial goals can still be achieved. This is but one way of how a financial adviser can add value to the relationship with customers, and there is no replacement for having those open and honest discussions to understand customers’ underlying needs,” Van der Merwe concludes.
