The myth that colorful participant statement stuffers and interactive web sites will turn your 401k plan participants into little Warren Buffetts by reading and interacting with them is only that, a myth. Let's be honest and finally admit it - we are failing to provide our participants with the services and choices they need to make effective investment decisions. All the studies show this and if you ask your participants, they will tell you as well. It's not working.

The Best Education Web Sites Are Already Built

I work with 401k participants every day and you may build the most beautiful 401k plan education web site in the country and they won't use it. Frankly, the best web sites for participants have already been built such as Fidelity.com, Morningstar.com, Bloomberg.com, and many others. Anyone who wishes to learn about investing in their 401k plan has access to all of these web sites that have much more financial information than any company sponsored site. Guess what? They don't use these sites either.

Yes, of course, they are those rare individuals (like myself) that find these kinds of financial sites fascinating but that is not your average participant. For the vast majority of participants, you will not reach them by building better passive investment education tools. It is a waste of time, money and effort.

Active - Individualized - Complete

401k participant education must be active, it must be complete, and it must be individualized or it will be ineffective. What do I mean by "active?" This relates to setting aside time on a periodic basis to have a face-to-face trainer meet with your employees and help them understand the benefits and risks of their investment choices. This is not an enrollment meeting but a minimum of once-a-year education session that employees are paid and given time off to attend. We are talking about their financial health and well being, which for many people is as important as their personal health. It is critical to make the time and spend the money to give them active training, not just passive.

What is "individualized?" As you probably guessed, this means each participant is provided with questionnaire that will help them tailor their portfolio to their own risk profile. It should be part of the annual training session that each participant fills out his or her own risk tolerance questionnaire. This can be very enjoyable and enlightening for your employees. It is also one of the most important steps in this process. I would go as far as to recommend that a company should have in an every employee's personnel file (who is a participant in a your 401k plan) a completed and signed risk tolerance questionnaire. This document will demonstrate that you at least took the time and effort to help your employee determine the most basic and fundamental of investment questions - are you a conservative, moderate or aggressive investor?

What is meant by "complete?" Training should be followed up with the right kind investment choices available for your participants. How can you talk to them about the basics of building 401k investment portfolios and their risk tolerance without giving them the tools they need to complete the job? This requires a minimum of 23 different investment options (24 with company stock) representing different investment classes. In other words, don't provide excellent training and them give them rusty and dull tools. Give them the best tools and keep them honed and sharp. Selecting excellent investment options and monitoring those options for performance and consistency will provide this.

Break Out of the Passive Education Paradigm

Most people will inherently understand that the education program described here will work better than statement stuffers and web sites. We need to break the passive education paradigm in retirement education planning and get actively involved with our participants. It will get your employees motivated, make them feel better about their decisions, and most of all - will provide them with a more comfortable retirement in the future. After all, isn't that what retirement planning is all about?

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