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HelloWallet Webinar

Behavioral Insights for Wellness Program Design Jonathan Zinman Professor of Economics, Dartmouth College Scientific Director, U.S . Household Finance Initiative. HelloWallet Webinar. June 11, 2014. Dr. Jonathan Zinman. Key high-level assumptions . Employee wellness matters

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HelloWallet Webinar

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  1. Behavioral Insights for Wellness Program Design Jonathan Zinman Professor of Economics, Dartmouth College Scientific Director, U.S. Household Finance Initiative HelloWalletWebinar June 11, 2014

  2. Dr. Jonathan Zinman

  3. Key high-level assumptions • Employee wellness matters • Economics of employee decisions around wellness is complex • Countless daily decisions that cumulate • Infrequent but very high-stakes decisions • Psychology of employee decisions around wellness is complex: http://www.dartmouth.edu/~jzinman/Papers/Behavioral_Design_101.pptx • Outside markets for wellness solutions suspect • Employer wellness benefit design matters

  4. Key takeaways • There is low-hanging fruit! • Apply insights from behavioral economics (BE) to do better job of connecting employees with existing offerings • Use communications, on-ramps, and menus • Few additional resources needed • Prescription is method, not a recipe • Develop using BE insights and institutional knowledge • Test using gold-standard AB/RCT methods • Measure and learn • Tweak or re-design, and test again

  5. Today’s Plan & Background

  6. Plan for today, background • Show how this method works, using real and hypothetical examples • Today’s talk based on experiences working on over a dozen marketing, messaging, and onboarding projects • Companies of various sizes (mostly financial institutions) • U.S. and abroad • Handful of completed projects • Many more underway • More details • http://www.dartmouth.edu/~jzinman/ • http://www.poverty-action.org/ushouseholdfinance

  7. Plan for today, background • Focus on financial wellness • Happy to field questions about health, etc. later • Focus on immediate source of stress/distractions • Lack of rainy-day savings • Debt load and repayment problems • Lack of plan, or engagement with one • (401k’s part of the problem here rather than a solution?) • Why these focii?...

  8. Background: symptoms • Many/most of your employees may be financially fragile: • Lots of borrowing (overborrowing?) • Mortgage crisis • Bubbling student loan crisis? • More credit card debt than any economic model can explain • Share of consumers with subprime credit: 56.4%1 • More payday loans -> worse job performance (Carrell and Zinman) • Many without savings (undersaving?) • Households with insufficient liquid assets to subsist for three months at the poverty line in absence of income: 43.9%2 • Households reporting no saving in the previous year: 48%3 • Many pay premia for financial services (overpaying?)4 • Assets (e.g., mutual funds) • Loans • Advice

  9. Messaging solutions,with two examples

  10. Rainy day savings solutions: smarter messaging • Pain point for employees– low financial resiliency • Pain point for employers– no direct offering. But do offer… • Crisis hotline • Financial planner • Online financial education • Payroll/prepaid card with savings bucket • Approach: messaging, marketing, and/or process changes around these offerings

  11. Messaging for rainy day savings • “If you make… deposits, you will receive [small yield incentive]” • “If you miss a deposit, you will lose [small yield incentive]” • “If you make… deposits, you will receive [small yield incentive] that you can use to reach your saving goal of [client’s goal]” • “If you miss a deposit, you will lose [small yield incentive] that you could use to reach your saving goal of [client’s goal]” • Results: • 1 and 2 push • 3 and 4 push • 3 and 4 >> 1 and 2 • Test 1. Which works better at encouraging regular savings deposits?

  12. Messaging for financial resiliency • Test 2. Which works better at controlling discretionary spending among a sample of active HelloWallet users? • Email every Friday re: the budget for that weekend • Same as #1, but every other week • Same as #1, but don’t start until 4 weeks after enrollment • Results: • 3 > 2 > 1

  13. Messaging design, why it’s hard • Many design elements, thousands of possible permutations: • Content • Amount of content • Timing • Frequency • Duration • Customization • What matters, and works best, depends critically on context • And context itself is a many-splendored beast! • Project underway to do work like this with dozens of companies worldwide. You can join us! • email jzinman@dartmouth.edu now!

  14. Messaging + Process Changes, with three examples

  15. Example 1. Rainy day savings Messaging + process change example • Present installment loan borrowers with the proposition: “You’re making monthly payments now… here’s an easy way to continue making those payments, to yourself, once the loan is paid off” • Framing: borrowing as habit formation for saving • Process change: give someone a one-page auto-transfer authorization at an opportune time • Doing this with 10 credit unions • You could do this by messaging to employees with: • Payroll card with savings bucket • Own bank account (could offer when someone is filling out direct deposit authorization for payroll) • Join in our research! jzinman@dartmouth.edu

  16. Example 2. Debt reduction • Pain point: student debt burden • Potential solution: messaging and on-ramps that connect employees with alternative repayment plans that reduce monthly payments • Pain point: repeat use of expensive debt products • Potential solutions: • messaging that informs and nudges before someone reaches point-of-sale • on-ramps that connect with lower-cost, longer-term loans (employer credit union, employer-intermediated loan, etc.) • messaging and on-ramps to PFM solutions (HelloWallet, meeting with an adviser, etc.)

  17. Example 3.Behavioral 401k, v3.0 • v0.0: matching • v1.0: auto- (opt-out) enrollment • v2.0: auto-escalation • These solve enrollment and contribution rate problems • They do not solve employee wellness problems • To solve for wellness need greater focus on: • Immediate needs, and liquidity to deal with them • Holistic needs (whole person, or at least more of her balance sheet) • Wealth accumulation

  18. Behavioral 401k v3.0: for wellness • Add messaging that focuses on the whole, and the immediate • Don’t borrow your way to 401k contributions • Do use 401k as a safety net if the alternatives even pricier • Change menus, or add nudges, for wealth accumulation • Eliminate or marginalize high-fee funds • Provide auto-diversification options • Change process to nudge active, informed decisions about 401k • Enrollment (new employee on-boarding) • Open-enrollment

  19. Key takeaways • There is low-hanging fruit! • Apply insights from behavioral economics(BE) to improve employee (financial) wellness • Using communications, on-ramps, and menus • Few additional resources needed • Prescription is method, not a recipe • Develop using BE insights and institutional knowledge • Test using gold-standard AB/RCT methods • Measure and learn • Tweak or re-design, and test again

  20. Follow-up • Questions? Interested in working together? • jzinman@dartmouth.edu

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