Demystify the investment menu with the right language

Our 2021 Watch Your Language study took a closer look at the language of defined contribution (DC) plans. Alongside word specialists, Maslansky + Partners, we conducted online surveys with 610 DC plan members working for large employers in Canada. The study focused on the impact language can have on members’ overall understanding of the plan’s investment menu, professionally managed options, and how best to communicate retirement income.

Among our key findings, we learned that when survey participants first joined their current employers’ retirement plan, 35% chose their own investments versus being automatically defaulted into the plan’s investment option (45%). Whether plan members invest on their own or stay in default options, there’s no question many find their DC investment menu somewhat confusing. What can help?

To begin, we found that plan members preferred more control (or the perception of it), rather than less, when it comes to their money. Language conveying that members have the ultimate decision-making authority over their retirement assets consistently won out — both with those who preferred to be highly involved with investment decisions, and those who do not.

We also found that plan members preferred investment menu names that provide cues about the offerings. While the retirement plan industry often uses a “tier” structure, this language doesn’t provide any context to members. Instead, sponsors should present the investment menu with clear and descriptive titles.

When deciding how to present target date and target risk options, positive framing is important. Plan members were significantly less likely to select from a group of funds that ranged along a higher-risk/lower-risk and aggressive/conservative spectrum. Instead, more than half picked funds that ranged from “growth-focused to stability-focused.” Beyond sounding more positive, these descriptors provide greater context and clarity. In addition to aligning with members’ desire for investments that are diversified, using the term “portfolio” signaled a collection of investments in a way “fund” and “strategy” do not.

Finally, members responded well to messages that communicate they’re not on their own when it comes to their retirement savings. For less knowledgeable members, language that conveys support increases their confidence in professionally managed portfolios. For more sophisticated members, the language of support speaks to how these investments can help them save and invest for the future.