Gamification of Financial Planning

Almost 40% of workers with a retirement plan in the United States are woefully unprepared for retirement, with less than $25,000 in total savings and investments. That’s not a huge surprise when you consider that 21% of workers with an employer-sponsored retirement plan are not contributing to their plan; 44% are saving less than 10% of their income; and 33% are not familiar with their retirement plan’s investment options. Things in Europe and Australia are about the same.

Research from the MIT AgeLab suggests gamification can make a significant difference in how a client responds to the type of retirement planning advice the industry offers. Too often, people are don’t plan for retirement because it seems too boring, complex and scary. Financial wellness takes into account choices and consequences. However, many people can’t visualize their future well enough to understand the interplay of these concepts. That’s where gamification exercises and goals-based experiences can help.

People like to see how their choices impact their retirement goals, based on a number of inputs and assumptions. They like to see the positive impact of a higher savings rate. They don’t like to see the impacts of higher inflation. People want to win, and improve their chances of a comfortable retirement.

Gamification appeals to a broad range of personality types by providing clearly defined rules and rewards, engaging friends and family members and the clear visualisation of progress.

There is a real opportunity to shift the amount of attention and effort people put into financial planning by engaging customers in their own retirement planning process, giving them more control and by so doing, diminish fear and indecision. Gamification is a great way to deliver a fun, interactive client experience that facilitates a more dynamic conversation and a deeper discovery process, which should result in better retirement outcomes.

This opportunity is particularly relevant for the target segment – Gen Y. Although Gen Y is often referred to as the “technology generation,” a more appropriate moniker would be the “connected” generation. Throughout their lives they have played online games to connect, compete and compare themselves with friends (both real and virtual). And there’s growing evidence that plan sponsors can leverage this mindset to design online gamified wealth management experiences that engage Gen Y around financial planning and well-being.

Moroku recommend that wealth providers base any engagement on two key principles:

1/ It’s a journey – We’re not going to turn this around overnight but future customer capture is dependent on it. Take the time to map the journey from start to finsih and think about all the things that need to drop for success to result.

2/ Make it fun. Its really boring and hard and thats why people dont do it. If clients are going to pay attention and start doing things they’d rather not we better make it fun and rewarding or they will  revert to form.

When it comes to the how it’s gotta be mobile. The business of planning is expensive and resource constrained. Sitting down with everyone is impossible and only really pays off for the wealthy, which interestingly may be those that need that advice less. In Australia, advisors have to date only been able to engage in man to man marking with those that have more than $250K to invest which is only 10 – 15% of the population. Let’s have a look at the numbers. A planner has about 220 days a year to get some work done. Seeing a customer every day isn’t regarded as feasible as there’s too much to be done. If each customer brings in $250K in Funds Under Management (FUM) that should generate about $2.5K in fees, meaning they need 140 customers each which is regarded as a good work load for man to man marking

Planner Salary $250,000
Overheads $110,000
Total FTE Costs $350,000
FUM Target $250,000
Fees 1% = $2.5K
Required # Customers 140

These numbers are well known and have lead to all those customers who have more than 250K being wrapped up in a wealth advisor relationship. If there is to be any growth in the segment we have to find cheaper faster ways to serve those with less than $250K in FUM and get them saving. The only way to serve them is via mobile and online.

This is why investors are pouring hundreds of millions of dollars into startups that provide online financial guidance. Some of these companies offer portfolio-management tools in competition to traditional advisors and banks. Although they are startups and have yet to generate substantial revenue or profit, they are fetching lofty valuations as investors view them more like Internet companies than as conventional financial-services firms. Redwood City, Calif.-based Personal Capital, for example, has no branch offices but offers access to human advisers in addition to online account-tracking tools and automated investing. 30% of the more than $1 billion in assets it manages are in accounts of $1 million to $10 million. Other firms, including Betterment and Wealthfront, charge lower fees—or for some small accounts, zero fees—and cut out human advisers almost entirely. Wealthfront focuses on younger investors, with half of its customers under the age of 35.

Current superannuation, 401K and wealth management providers must move to mobile with fun, guided experiences because its the only way to grow and if they don’t the Betterments of the world will begin to eat their lunch.

There are two great quotes to end on in a good article in Forbes for those that have got this far and are tasked with building next generation wealth management solutions:

  • Jason Gurandiano, head of financial technology investment banking at Deutsche Bank AG , “You have a shift from baby boomers to a tech-savvy generation that’s inheriting the wealth and doesn’t have an appetite to deal with a traditional broker at the golf club,” he said. But he added that his 20 years in the industry have taught him that “behavior also takes longer to disrupt than you originally think.”
  • Daniel R. Odio was CEO and co-founder of Socialize, Inc. The 39-year-old, who sold his social-media company two years ago, said he often uses Betterment’s iPhone app to add more money to his account. “It’s the gamification of investing. I love the feeling that I get when I use it,” he said.