Chris: Understanding the mindset of the participant. They're still searching for the same things they were 30 years ago. Behavioral finance. The average person doesn't envision themselves struggling in retirement. And waving a magic wand. Yes, it's a great thing for yourself, but think about your loved one.

Jim: All this and more on today's episode of The Wave Strength.

Wave Strength: Welcome to The Wave Strength. Innovative solutions for a secure retirement. Presented by Pacific Life.

Jim: Hello everyone. And welcome to another exciting episode of The Wave Strength podcast series. I'm your host, Jim Breen, head of marketing with Pacific Life's Institutional Business team. We're very excited today to be in the studio with Chris Stout, Head of National Markets for Pacific Life's Institutional Business Team.

Jim: Chris, thanks so much for coming out and joining us today here in the studio.

Chris: Great to be with you again, Jim. Thanks for having me out.

Jim: Yeah, it's always a pleasure to sit down with you in the studio. I know we were together not long ago talking about engaging with planned sponsors and today we have another very interesting opportunity to talk about the participant, but the participant mindset, more specifically. So Chris let's, jump right into it here. You obviously have been in, in, the industry for some time. You have 30 years of experience that you bring to the table. You've seen a lot of things. Can you just help our audience right now, maybe understand the current state of the participant mindset?

Chris: I love this question because ultimately that's what everything that we do is about, right? Driving retirement outcomes for participants. Putting them in a position where they can reach normal retirement age with adequate income for life. And if you think about the last 30 years and all the advancements we've made in the tools and resources that are available to participants, as an industry, we've moved fast, but the participants have largely been left behind.

Chris: So if you look at the most popular Google searches that the average participant does right now, I encourage people to go out there and search right now, top Google searches of 401k participants, you're going to see things like, what's a 401k plan? Is a 401k plan an IRA? How much should I be saving? They are very basic.

Chris: Many record keepers are struggling to get people to even take advantage of the benefits that are available to them. And all of this comes during a time when the industry is trying to, I'm not sure if you've heard this phrase before, monetize participants. There's this theory that unless you're selling additional asset management or additional products and services to participants, you can't be successful.

Chris: You can't sustain being in the retirement industry. While the industry is trying to get asset management, sell additional tools to participants the participants are not receiving those messages by and large, because they're still searching for the same things they were 30 years ago.

Jim: It's so interesting to hear you say that, and Pacific Life, we've done such a great job, in my opinion, of really early on saying let's pump the brakes a bit here, because as an industry as an industry, when we have even the sales folks out in market that say, I'm really excited to have this meeting with the participant, but I don't even understand as a salesperson, what I'm trying to explain to this person who's going to utilize this solution.

Jim: And the Alliance for Lifetime Income, for example, of which Pacific Life is a charter member has done such amazing work. Unpacking, uncovering, I use that word unpacking all the time because I think it's an important one, unpacking what this solution means or unpacking what hey, here's what a 401k is over here, even from a very base level.

Jim: And I think we lose sight of that simple frame of mind that to, think about where those average individuals are in their journey, because let's not forget everybody, everybody has a unique journey in their life. We can't do a one size fits all approach when we bring those solutions and the education to those audiences.

Jim: We have to remember that everybody, we're all dealing with unique things in our lives that will affect the way in which we absorb the information. So it's it's great to hear you say that about that, mindset and, your understanding of it.

Chris: Yeah I, completely agree and it's one of the things that drew me to Pacific Life.

Chris: I ran to Pacific Life because I saw how different...

Jim: which is impressive because you live in Colorado and we're in Newport Beach. That's impressive.

Chris: It's just it's so refreshing that the participant truly comes first. Yes. I'm trying to build solutions. That will put them in the best position to be able to enjoy a financially secure retirement.

Chris: I'm not saying the industry does care about participants, but Pacific Life has positioned things in a way where participants truly come first. The participants I mentioned that they've been left behind a little bit. And the tools and resources that are being built both for advisors and consultants to use plan sponsors to use as well as participants are making a difference in helping them understand what's available and putting them in the position where they can take appropriate action for their retirement savings.

Jim: Let's talk a little bit here about the participant, maybe we have some folks in that position right now watching this show. What's something that an individual that's just trying to grasp "man, I have so much happening in my life how can I just even begin to prepare for retirement?" Maybe they just entered the workforce.

Jim: Chris, is it, hey, start with that emergency fund and just start with that. Maybe start with some basic education. What's, what are some tools that you can suggest to that average participant?

Chris: I tend to like, there's so many great tools out there. The autos clearly were the best thing that we did for plan sponsors and for participants because Shlomo Benartzi wrote this great book, Save More Tomorrow it really talks about designing plans to break down resistance points for participants so that it's easy for them to make appropriate decisions.

Chris: Autos does make it simple for participants. Auto enrollment. Auto enrollment. Yes. Auto escalate. Yeah, and we're seeing that participants want that. They want almost like that pension like experience within their 401k plan. Yes. But the thing that has shocked me, when you talk about what tools and resources are available out there.

Chris: I tend to get more excited about the behavioral science type tools and watching an earlier podcast that you did with, our leader, Karen Neely. And she mentioned the, wow moment when, she realized that financial decisions are largely based around, around behavior. Than they are around fact.

Chris: And if you think about what the average American statistically cannot afford to pay a $500 unexpected expense, why should we expect that they're saving money to and deferring it for 10, 20, 30 years down the road? When they don't have enough money to pay for the average $500 unexpected expense.

Chris: So I love the tools and resources that are available to help them understand the necessity for that. There's something called the optimism bias. And I'll give you a real quick example. I had done a finals presentation in Texas. The team got back to the hotel. And the tornado sirens went off and I was exhausted.

Chris: I put the pillow over my head and I went to sleep. Clearly I'm a sound sleeper because I woke up the next day and a tornado had blown through so bad that our rental car was destroyed. It had been blown across the parking lot. That optimism bias, the optimism bias is bad things only happen to other people.

Chris: And if you apply that to retirement savings, The average person doesn't envision themselves struggling in retirement. They may know that's a fact, that, or a factual possibility, but they cannot envision the fact that might happen to them. That's a very real possibility. So there are tools that we can put in front of them to help them close that optimism bias.

Chris: Another one that I love is the longevity disconnect. When you think about the average participant when I say your name, Jim, your prefrontal cortex lights up. We get excited. But when I ask you to envision yourself in retirement, 20 years from now, it's as if you're talking about a stranger. There is no...

Jim: and by the way, I have five kids, so it's more like 40 years from now, but please, yeah, please If you ever retire.

Jim: Yeah, if I ever retire, yeah.

Chris: But there's no physical reaction in the brain because we disassociate from our, ourselves in the future. So why would we want to take, make sacrifices today for somebody that we associate as being a stranger in the future? There are tools and resources that we're building for participants that address the behavioral science that those emotional factors that will break down barriers to get them to understand this is why it's important for me to, make these sacrifices today for my future self.

Jim: That behavioral finance side of the equation is so important and one that we, cannot lose sight of. You bring up such interesting points. Let me ask you, Chris, as we wrap up here. It pertains to this mindset of the participant. If you could wave that magic wand and change one thing in the mind of a participant to help them understand or to be more comfortable with some of these processes they need to consider early on in life, what would that be?

Chris: That's such a great question. As I think about even myself as I'm, getting older and I'm starting to get closer to retirement age and these things are becoming more real for me, I'm remembering as a younger person. That, disconnect again and a lot of people, your average participant think about retirement savings as, as something that they're doing for themselves only.

Chris: This is for my retirement. But what I wish I could get every participant to understand is the decisions to, that you make to save for retirement not only affect you, they affect your loved ones as well. It's a very unselfish decision. To, make those sacrifices today, because if you do reach normal retirement age without adequate income, you're going to potentially be a burden on the people that you care most about.

Chris: So I would, I'm always going to encourage them. Yes, it's a great thing for yourself, but think about your loved ones because the failure to take appropriate steps today. Could have very negative consequences on the people that you care most about.

Jim: It's so important. So important. Chris, thank you for that information.

Jim: Thank you again for sitting down with us in the studio to have this conversation about the mindset of a participant. And how can people find you on LinkedIn?

Chris: I'm out there as christopher. stout on pacificlife. com. I go by Stout, but you can call me Chris. If you, shoot me a message on LinkedIn, then I'll certainly get back in touch with you by the end of every day.

Chris: So I appreciate you guiding them to how they can get in touch with me.

Jim: Absolutely, Chris. Thank you so much. And to our audience, I want to thank you for joining us today on another exciting episode of The Wave Strength. And I want to encourage you to head over to YouTube, Spotify, and Audible hit like, and subscribe so that you can stay current.

Jim: With current content as it becomes available. Once again, thanks so much. And we'll see you next time. Everyone.

Wave Strength: This has been another episode of The Wave Strength presented by Pacific Life. Don't forget to catch us on YouTube and make sure to subscribe. Although this podcast is presented by Pacific Life, the opinions and views expressed are those of the hosts and participants, and do not necessarily reflect Pacific Life's views on any of the topics discussed unless otherwise noted.

Wave Strength: Pacific Life is unaffiliated with any other individual or company mentioned. Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products. Pacific Life, its affiliates, its distributors, and respective representatives do not provide any employer sponsored qualified plan administrative services or impartial advice about investments and do not act in a fiduciary capacity for any plan.

Wave Strength: Pacific Life refers to Pacific Life Insurance Company and its subsidiary Pacific Life and Annuity Company. Insurance products can be issued in all states except New York by Pacific Life Insurance Company and in all states by Pacific Life and Annuity Company. Product availability and features may vary by state.

Wave Strength: Each insurance company is solely responsible for the financial obligations accruing under the products it issues. This podcast was recorded on July 17th, 2024.

Jim: Thanks for joining us on today's show. We'd love to hear from you join the conversation below and leave a comment on your thoughts on what the industry can do better for participants as it pertains to lifetime income solutions. And if you'd like more interesting content, click one of these links over here.