Last week I was with clients in Louisiana and after a Financial Education meeting with 401(k) plan participants I had one participant approach me to say that I'd scared the crap out of him. 

This is a retirement plan that had auto-enrollment at 2% prior to me becoming their Retirement Plan Consultant and did not have auto-escalation.

(Note: the three biggest mistakes I see with these auto features are (1) Not having auto-enrollment, (2) Having auto-enrollment but setting the initial enrollment too low, (3) Having auto-enrollment but not also utilizing auto-escalation.)

If a participant is enrolled at only 2% it actually might have been better to have not had auto-enrollment at all. The subtle message to employees is that 2% is enough and if left to their

 own volition most would have enrolled at a higher number.

So this plan had auto-enrollment at 2%. Which means this guy was enrolled at … 2%. I told the group that they needed to save at least 10-15% during the accumulation years as they were building the account and be prepared to save 30% as they neared retirement.

Are we afraid as advisors to scare people or to be brutally honest? We’re not doing them any favors if we try to soften the blow and aim for a smaller number.

(Note: most plan participants will hit a number lower than we’re aiming, so if we aim for 8% they may hit 5-6%. We need to boldly aim for 15% if we hope to have them hit 8-10%.)

So he comes up to me after the meeting, in front of the owners of the company, and thanks me for scaring him. He thanked me! “I needed to hear it,” he said.

I probably scare people all the time; I don’t always receive a thanks for that little nudge to do the right thing.

Some sales people scare prospects into buying from them. As a proponent of Financial Psychology I understand the emotions of FEAR & GREED that drive most money decisions, and I understand that using them to sell business is manipulative. But if the intention is to serve the employee by nudging them to do the right thing we can’t be afraid to scare people.

Personally it made my day to know that I’m doing exactly what God created me to do, and in serving others I’m making a difference in how American retire … one employee at a time.