The Hire thru Retire Podcast

Participant Behavior Amid COVID-19 with Tom Armstrong

• Voya Financial • Episode 5

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So much of what we do, both within Voya as company and the industry at-large can not only benefit from, but is driven by data and analytics. Amid a year of market volatility and financial concern, looking at participant behavior among retirement accounts is more important than ever — and that includes not just actions people are taking, but sentiment. Joining Bill and Heather today is Voya’s own Tom Armstrong, VP, Customer Analytics and Insight, who shares the latest trends based on actual actions of participants over the past year. 

 

Data referenced in this episode includes results from Voya’s internal data as of Dec. 31, 2020.

 

Bill Harmon is a registered representative of Voya Financial Partners, LLC (member SIPC).

 

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Speaker 1:

You're listening to hire through retire. I hope and wealth podcast for your leaders, bill Harman and Heather, LaVale tackling all things from 401ks to HSS and everything in between. We're talking to the best and brightest in the industry to bring you the latest in health, wealth, and investment trends in the workplace. Come along with us on our journey to help all Americans become well-planned well invested and well-protected

Speaker 2:

Hi, I'm bill Harmon. And welcome back for those of you who are just joining us today. We've launched this new series to bring you the latest news and insights around broader workplace trends. I'm here today with my friend, colleague and cohost have a little Valley.

Speaker 3:

Hey Heather, Hey bill. You know, uh, I'm really happy to be back here for another episode. This has been a fun adventure. So we've set up before on this platform, but one thing we're always interested in hearing more about is data and analytics. So much of what we do both within our company and the industry at large can not only benefit from, but is driven by data. We heard some great insight through the lens of research from Kerry city a few weeks ago, who brought us the broad consumer view. And we're fortunate enough today to have our own in-house expert, who takes a look at trends based on actual actions of participants.

Speaker 2:

And that's a good point, Heather, especially coming out of the year of COVID that we just all experienced and looking at the actions of our retirement plan participants and where they're taking us has never really been more important. So here with us today to talk us through that is our very own data expert, Tom Armstrong. Hey Tom, welcome to the pod. Why don't you tell our listeners a little bit about your background and, you know, we, we all know you as our data insights King, but maybe give our listeners some background.

Speaker 4:

Sure. Thanks bill. So glad to join you and Heather and actually the whole audience here today. I'm responsible for a data and insights here at Voya. So what that means is I'm researching how our customers are behaving and also doing some work within our Voya behavioral finance Institute for innovation to test different treatments about how we can influence behaviors in a positive way. So I'm really looking forward to sharing what we've seen and, and studying in both participant behaviors and participant sentiment over the last year or so. Um, as we try to help customers save for the future.

Speaker 2:

Yeah, you're right. And boy, obviously there's been a lot to study over this past year, so really knowing where to begin is tough, but I'm going to start with something. I think our listeners might be interested in hearing. So let let's start with participant actions. We saw these volatile markets going up and down and in all sorts of different directions last year with that one might assume that individuals made changes to the retirement accounts as a precautionary move, but tell us what you saw.

Speaker 4:

Sure. Thanks bill. Um, yeah. Wow. Great question actually, um, saying that we had market volatility last year, it was probably an understatement, although we saw some spikes and trading volumes last year. Uh, I think the good news is that most participants actually did stay the course in 2020, uh, which actually I think connects back to what Kerry said. He had mentioned in a, in an earlier podcast in terms of what she saw from broad consumer research that, uh, people were indeed actually quite resilient even during what, what amounted to a very challenging year. So as you suggested, I am sort of the data guy here at Voya and I'd be a bit remiss if I didn't include a few facts to support that resilient theme and perspective. I guess if I first look at trading behaviors, just focusing on that topic, the fact that was that 95% of our participant base actually stayed the course and, and didn't actually make any investment trades in 2020. And in addition, we actually saw 94% of participants, you know, didn't change their future investment elections either. You know, all of this is good news and probably a combination of, uh, I would suggest constant and ongoing education coupled with, uh, maybe just a bit of investor inertia on the loan and hardship front. When we look at, at sort of those behaviors, only 4.4% of participants requested a loan or hardship in 2020, which in 2019 was actually 3.8%. So all things considered and given the magnitude of, of the pandemic, uh, this is really not a huge increase, albeit you know, fairly impactful to some. And then finally, one of the, one of the biggest things we saw, which actually might be surprising is that for those participants that changed their savings rate during the last quarter of, of last year, 70% of them actually increased their savings rate. So it's interesting, we've seen this positive savings behavior, uh, and we're going to be carefully monitoring and studying this year, how things like stimulus payments and the reopening of the economy impacts those savings behaviors as we move into further into 2021. You know, one thing I did want to mention is that from a plan design perspective, uh, things like auto features, including auto-escalation and re enrollment in plans continues to really be a meaningful driver of ongoing improvements to participant savings rates. And, um, interestingly, it seems like those are holding true even more so during the pandemic last year,

Speaker 3:

Now, Tom, those are really fantastic statistics about participant actions. Do you have any insight into how participants are feeling these days?

Speaker 4:

Yeah, sure. I love that question because we really do care about how people are feeling. We want to make sure that they're feeling good and confident about, um, about themselves, but also help figure out where we can help them, uh, get on track and have improved sentiment. So, you know, in addition to monitoring participant financial behaviors, which we just talked about, we do indeed continue to measure and analyze how people are feeling and similar to what Carrie shared. In the first episode of the podcast, we have seen participant retirement sentiment decline actually during the pandemic. Uh, so it declined significantly during March. The great news is that the end of the year, um, by December of of 2020, it had fully recovered. So we saw a 15% decline and then a 15% increase right back to where we were at pre pandemic levels with about 76 percentage of our, uh, percent of our customer base saying they have a positive retirement outlook by the end of last year. Um, so I think that really, uh, shows that customers are resilient, um, not only observed by their behaviors, but this quick rebound in sentiment and confidence, you know, further highlights the resilience and how they're feeling as well. And I do think it's important for all of us to continue to keep a close watch on both, both these behaviors and the sentiment of our participants. Uh, so we can better tailor personalized experiences and messaging as we look to sort of establish a new normal, uh, with the way we engage them post pandemic,

Speaker 2:

You know, Tom, last year we had major legislation passed and that was the cares act. And we were really keeping a close eyes to say, well, how would participant behavior change through the cares act and some of the provisions that were made available such as withdrawal provisions. Can you tell us a little bit about how you saw us and certain trends or changes in participant behavior as a result of the cares act?

Speaker 4:

Yeah, sure, sure. Bill. Um, so, you know, I think first to set the stage, um, and to frame some of the data I'll share in a minute, uh, Voya adopted and in a, a sort of an opt-in approach to allow employers to work with their consultant or advisor TPA. Uh, and quite frankly, the relationship team met here at Voya to consider what was the best for their plan and their unique employee population relative to, to adopting each of the cares act provisions. And what we found in, in taking this approach is that across our book of business at Voya, we saw about one in four plan sponsors adopt at least one of these carrot cares act provisions. And then when we drill in and say, and study plans that, uh, allowed at least one of those cares act provisions, we saw that just over 150,000 of those participants actually took advantage and processed a CRD or a coronavirus related distribution. And each of those distributions on average was about$17,000. So as we discussed earlier, it was a relatively low percentage of participants that took a hardship or a CRD or a loan last year. Um, but we did see an increase in, in hardships through this, the CRD provision, not surprisingly, especially in industries that were more impacted by COVID related shutdowns. Um, we did find that a higher adoption of both those plans forbid provisions, but then also ultimately of the usage of those provisions. So industries like retail and hospitality, uh, where we saw more, more furloughs or, or folks, uh, having hours cut back, unfortunately, you know, we did see a higher usage of those provisions in those different industries. You know, one thing I did want to share is we had found even pre pandemic, but it was actually sort of further reinforced, uh, last year is that, you know, this lack of emergency funds that we've we've seen as an industry really does put retirement at risk. And it sort of was further illuminated, I think last year through the pandemic. In fact, our data shows that, you know, about half of the participants actually don't have adequate emergency funds and that's a huge issue for retirement because, you know, without adequate emergency savings, um, we actually have seen people without those funds are 13 times more likely, for example, to take a hardship from their retirement plan three times more likely to take a loan. And so clearly, uh, we're concerned about, about this lack of emergency preparedness. Um, but the good news is if, if there is good news here that, you know, I think the pandemic did, aluminate the concern at both the plan level, the participant level, certainly at, at our level of as a record keeper. And, you know, I'm confident though that the work we're doing together in partnership with people like Nick Maynard, who you just recently had on, on the show as well from Commonwealth, will be able to start to close this gap and get more employees to, to be on a secure financial footing,

Speaker 3:

Speaking of trends. And, uh, you you've talked about a lot of things related to the pandemic. I wanted to switch and talk about something I think really worth highlighting. And that is particularly, we are all engaged in a digital world. That seems to be more digital than ever before, is the correlation received between greater retirement saving and digital engagement? You know, can you tell us more about what you're seeing on that front?

Speaker 4:

Sure. Yeah, we certainly live in a digital world. I think it's, it's, it's accelerating faster than, than we can imagine. Um, first we saw an explosion in digital engagement last year. Uh, we actually saw an 89 million digital interactions in 2020. So that's login to our website, uh, or mobile app and that's up 44% from 2019. So not unlike our everyday lives where we know, uh, shop socialize, work, and even order food online. Uh, we're increasingly seeing retirement plan participants meet us in the digital space. And it seems based on data so far in 2021, that that shift to digital is going to continue, you know, digital provides us a means to message more participants about their next best actions so we can help them improve their outlook. Another advantage of this shift to digital is it's also letting us test and learn more rapidly at scale. Uh, we've shown through some of our research that we can help people save more by making the right choice, the easy choice setting, smarter defaults. We're also actually right now, testing a variety of digital nudges and messages to help compel employees who are interacting with us to adopt emergency funds or to sign up for features like rate escalation, to help get them on a better path for that financial future. Even if they can't save more. Now let's try to get them to commit to saving more in the future. And so finally, while digital increasingly the channel of choice, we recognize that, you know, some participants are going to be more apt to be hands-off with retirement. Um, and that's okay. We recognize that we want to meet people where they are, or in some cases where they're not. And so we as sponsors and consultants and record keepers in this profession, I think we can make sure that we have the proper sort of plan design, um, and, and put them on a better path in that regard. So we did just release a white paper from the Voya behavioral finance Institute for innovation, that outlines plan design during challenging times. And I think this helps to eliminate some of the smarter plan design considerations to help ensure that even these unengaged populations are on a better path to, to a secure financial future. Tell him that

Speaker 3:

It's great as always insightful, informative, and interesting to say the least, thanks for your time. And Hey, we look forward to having to come back.

Speaker 4:

Yeah, sure. Uh, Heather and bill, thanks so much for, uh, for having me on today. I look forward to keeping you and the rest of the audience updated as we continue to sort of uncover new insights in these, in this coming month.

Speaker 3:

And, uh, to our audience, we want to say thank you again for tuning in. If you want to keep hearing more from us, remember to go to our show page and hit the subscribe button to be notified at each new episode. Thanks Heather. And also let us know if you're enjoying our podcast by giving us a review. Thank you all again, for coming along on our journey today, stay well.

Speaker 1:

This information is provided by Voya for your education. Only need the voice nor its representatives to offer tax or legal advice. Any opinions expressed within do not necessarily reflect those of the way a family of companies, sports representatives, and are not intended to provide specific advice or recommendations for any individual. Please consult your tax legal advisor before making the tax related investment or insurance decision products and services offered through the Royal family of companies.