“With this new knowledge of diversity in psychological profiles towards education, advice, confidence, comfort, knowledge and decision-making abilities, employers can improve education offerings dramatically by tailoring them to the specific mindset of the plan member,” said Patrick Walsh, president and CEO, SEI Investments Canada, in a release.

According to SEI, the benefits using such an approach include: increased member knowledge and understanding of how to plan for retirement; better member investment decisions; and improved member satisfaction with their plan.

Earlier research conducted by SEI showed that plan sponsors are concerned about the threat of litigation, and believe educating their plan members is the most important and effective way to protect them from a lawsuit. However, employers admit their education programs have been ineffective.

“Using this research, employers can offer targeted education to address distinct mindsets and better address abilities and needs,” said Walsh.

The Five Plan Member Mindsets


“Smart Guys” (13% of survey participants) feel most knowledgeable, but exhibit the highest levels of overconfidence — opening them to the costly habit of frequent trading.

“Participators” (24%) are almost as knowledgeable and are also overconfident — the difference from the “Smart Guys” is their desire for employer-provided education. SEI says these members are too comfortable about the future and lack focus on long-term risks and needs.

“Disengaged” individuals (15%) struggle with their plans, and do not have time or interest for them. These members tend to use the default investment option more than other groups.

“Needy” individuals form the largest group — 26% of survey participants. SEI says these members struggle with their plans due to confusion. These people have the lowest level of knowledge, and are the least comfortable in managing their plans.

“Seeker” individuals (22%) are worried and want support. SEI says they have an insatiable appetite for education and advice in the quest to seek comfort. Their knowledge level falls in the middle, but they are least comfortable with the ability of the pension plan to provide for retirement.

The behavioural finance research was conducted in conjunction with Richard Deaves, Professor of Finance at the Michael G. DeGroote School of Business at McMaster University in Hamilton, Ont.

It involved surveying DC plan member to determined attitudes towards education and advice, as well as their levels of comfort, confidence and knowledge regarding pension plan management and investment decision-making abilities.

A complete summary of the survey, including gender, age, education and income levels of the various groups, is available from SEI Canada’s Web site.