The US election and EU referendum showed how communicating with people on a gut level is an effective persuasion tool. The pensions industry should take note, writes Stephanie Baxter.
At a glance
- Industry focuses a lot on facts and education but not enough on emotions
- If experts want to reach out to people who know less than them, they have to be able to connect
- Used correctly, emotions can be very effective in helping members engage and take action
Political events in the past six months have shown how emotional appeals can be far more successful at engaging people than campaigns based on facts and figures.
Both the Brexit and Donald Trump campaigns communicated with people on a much more emotional or gut level than their opponents. This should serve as a warning to this industry that trying to get people to engage and save more into their pensions requires a different approach to what has been done before.
Emotions trump facts
Quietroom strategy director Rhys Williams believes trying to persuade people through using education and facts is not enough as although most people know what's good for them, actually doing it is very difficult.
"These political events show us that simple beats subtle, feelings beat facts, stories beat statistics, and short beats long.
"Trump's gotten away with winning the US election through an ability to communicate on a gut level. As the pensions industry needs to communicate with people that don't have the knowledge or expertise we have, that's the only level it's possible to connect with someone on. Once you've made that connection there's room for facts and explanations, but people won't believe in the message unless they believe in the messenger."
In both the EU referendum and US election, most people effectively ignored the political, financial and professional elite. This presents a problem for the pensions industry, which is made up of the very professionals whom people no longer appear to trust. Also, if people are told they need to be educated this can come across as condescending, which only worsens disengagement.
"Experts are getting a really bad press, but if they want to reach out to people who know less than them, they have to be able to connect," says Williams. "That involves putting yourself into the mind set of someone who doesn't know what you know, feel or think like you do."
He says the first step is to understand people and what motivates them. "Then talk in their language about things they care about, and then you'll bring them to where you want them to be. You won't do that by staying where you are and hoping they'll come to you."
Help members take control
One firm that has taken some of this on board is Aviva. Six weeks ago it launched a digital pensions campaign to serve up the hard facts about how much people need to save now to have the retirement they want, but in an emotive way.
Shown in a TV advert, it used real people in a social experiment where it applied prosthetic face masks to introduce them to their future aged self, inviting them to live on their projected retirement income.
Consumer marketing director Lindsay Forster says: "Our campaign set out to change the [issue of people not saving enough] - to bring the future into focus and allow people of all ages to connect with the idea that they are in control of their financial futures. Not only is it their responsibility, but within their power to make a change for the better."
The firm has seen unprecedented levels of engagement.
Since the campaign's launch, it has seen more than 300,000 visits to its ‘Shape my Future' tool, and a 6.5 million reach on social media.
"This is because we've spoken to people and asked them what their concerns are rather than us driving the conversation," says Forster.
However, trustees and providers must be careful to avoid working on people's emotions to produce a result which may not be in their best interests.
Capital Cranfield Trustees client director Allan Course says techniques used by charities to tug at the heartstrings are transferrable to pensions, but warns trustees have to be very certain that what they're doing is morally correct.
"Is it legitimate to manipulate members to pay more into their pension scheme? We don't know if that means they'll be providing for their family less - that's the dilemma."
There is also a fine line between having enough drama to draw people in and not so much that it just drives them away, which charities have to be wary of.
But used in the correct way, emotions can be very effective to help members engage and take action on their own behalf.
Course believes most trustees err too much on the side of safety.
"They believe if they have presented the facts, it is entirely up to members to take responsibility thereafter. Communication material from trustees is not designed to help members but rather to keep trustees out of jail.
"Trustees should do a bit more because we know facts alone don't work. My philosophy is to go as far as I can to help members without breaking the law."
The goal should be to address people one to one, with a message they can understand and relate to their own lives, and respond positively to and act on.
Williams says this could solve all the problems with pension communications in one sweep. "It's not easy but that has to be the aim."
Online provider Pension Bee has created a flexible pension for self-employed savers, allowing them to make contributions according to their income.
Older savers are at risk of running out of their defined contribution (DC) pension savings with a third of their retirement still ahead, according to research by The People’s Pension and State Street Global Advisors.
Defined contribution (DC) contributions were scaled back by 11% in the second quarter of 2020 as the impact of the pandemic set in, according to the Office for National Statistics (ONS).
The Barclays Bank UK Retirement Fund (Barclays UKRF) has integrated ESG factors and climate risk into a £1.3bn diversified growth fund (DGF) portfolio used for its defined contribution (DC) scheme.
PensionBee has launched four ready-made investment pathway solutions with State Street Global Advisors (SSGA) ahead of the February implementation deadline.