Employees may have equal access to 401(k) plans, but participation is anything but equal. The recent release of Ariel Investments' and Hewitt Associates' "401(k) Plans in Living Color" study confirms what individual client studies have shown for years - that ethnicity is the number one predictor of 401(k) behavior.
Supported by the data of 3 million 401(k) participants, researchers concluded that African Americans and Latinos save less, invest less aggressively in stocks and, as a result, have lower 401(k) balances compared to their white colleagues.
These findings have broader implications beyond retirement readiness, as 401(k) participation has a positive correlation to employee retention, engagement, wellness and productivity.
Engaging diverse audiences
Ariel Investments has been calling attention to the wealth gap for years through its Black Investors Survey. In fact, Ariel called the 2008 report a "black paper" instead of a white paper because over the decade of reporting the results, blacks' net worth actually decreased. Ariel stated that things will change when companies take a more active role in educating employees and automating participation in retirement plans.
The few employers that heeded Ariel's call to action delivered more broad-based financial education that largely appeals to the self-study learning preference and independence-focused communication style of white men.
Research shows that what moves people of color and women to better saving and investing behaviors is advocacy, face-to-face interaction, cross-culturally competent workshops and learning from the experiences of others.
Unfortunately, large mutual fund companies - often the sole source of financial education because it's provided to employers for free - generally don't account for cultural preferences in their financial education approaches. Instead, their plain-vanilla approach is geared to steer lower-net-worth employees to Web sites and call centers.
However, there are simple ways companies can better meet the education and communication needs of diverse audiences. Here are some proven methods for engaging diverse employees in better investing behaviors:
* Listen to them. Hold focus groups with key audiences to help them articulate the barriers to investing and design an approach to hit the mark. Have the focus groups facilitated by someone who is the same ethnicity or cultural background as the target group. For example, National Black MBA collaborated with Hewitt Associates in the development of "Show Me the Money" financial education workshops that were offered to all participants of the 2008 national convention, complements of Kroger.
* Partner with employee resource groups. Generally, employee resource groups have goals around empowering the target population. Have a meeting with the group's leadership to see if financial empowerment could be added as a presentation topic. If the group has a Web site, see if it's possible to post articles having to do with positive saving and investing behaviors. Add direct links to the company's 401(k) Web site so that employees can act on the information promptly. For example, Hewitt Associates sponsored Ariel President Mellody Hobson to kick off Women's History Month with a speech on financial empowerment of women and sponsored "The Art of Financial Success" workshops in seven states, reaching more than 500 women, which produced results including a 50% increase in knowledge retention, and positive saving and investing behaviors.
* Create a cross-cultural financial education approach. Develop workshops, Web sites and print materials that speak to financial topics in a way that resonates by testing the materials with your target audience before it's made public. Beyond photos and colors that appeal to the targeted group, frame financial education in the world view of the audience. For example, there are efforts underway to build a multicultural financial education Web site that would feature financial planners of diverse backgrounds. Participants would simply click on the financial planner of their choice, and they would be led through a virtual financial planning discussion designed to more closely align with the communication style and learning preference of the participant.
Lisa Horuczi Markus is the author of "Living a Blessed Life: Walking in Faith, Growing in Wealth." A financial education consultant, and personal finance writer for SOUL MAG, Markus' personal mission is to economically empower women worldwide.
