The root cause of problems in 401(k) investment
education goes far deeper than mere jargon. Its source lay at the very feet of
our broader educational institutions. Why should we expect our 401(k) education
outlines to succeed when, for the most part, they’re patterned after the same
failed model of secondary school education?
If you extend the metaphor, it’s a lot easier to understand
why financial professionals are so frustrated by the lack of action by both
employees and plan sponsors following the typical education session. In both
the 401(k) education context and the secondary school education context, the
educators don’t speak the same language as the students. As a result, we have
lesson plans developed that work well for educators teaching educators, but
flop when translated to their intended audience.
What’s important to one isn’t important to the other.
Picture a parent explaining to a child why it’s important to eat healthy. For
the parent, the frame of reference is middle-aged health and how healthy eating
often prevents the onset of debilitating diseases. A parent speaking to a child
from this point of view will likely only illicit rolling eyes, yawns, and a
desire to mentally replay the most recent video game. On the other hand, if
“eating healthy” means the child might run faster, jump higher, and become the
football player he wants to become, then maybe the parent can get the child’s
attention.
Most employees – and even some 401(k) plan sponsors – would
rather be anywhere else than sitting in a 401(k) education seminar. Changing
the content or even, for the most part, delivery, won’t accomplish what needs
to be accomplished. Some think the use of humor represents the answer, but,
more often than not, humor only makes the generally hour-long session more
entertaining, not more educational.
Those looking for a real solution to this conundrum should
search not within the entertainment world, but in the world of rhetoric,
behavioral psychology and, in general, all matters pertaining to the art of
persuasion and the science of decision-making. Truth be told, plenty of tools
exist that have a proven track record of successfully convincing people to act
in a preferred manner. That some of these techniques have been abused by
nefarious governments tends to make them politically incorrect to discuss.
But a frank discussion must be had. For every Darth Vader
there is a Luke Skywalker. We need to understand the dark side of these tools
in order to prevent their misuse. But we also have to embrace their good side,
for that is what will lead us out of this 401(k) education netherworld.
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