June 11, 2014 HelloWallet Webinar

Behavioral Insights for Wellness Program Design

Jonathan ZinmanProfessor of Economics, Dartmouth College

Scientific Director, U.S. Household Finance Initiative

Dr. Jonathan Zinman

• Employee wellness matters

• Economics of employee decisions around wellness is complex

• Countless daily decisions that cumulate• Infrequent but very high-stakes decisions

• Psychology of employee decisions around wellness is complex: http://www.dartmouth.edu/~jzinman/Papers/Behavioral_Design_101.pptx

• Outside markets for wellness solutions suspect

• Employer wellness benefit design matters

Key high-level assumptions

• There is low-hanging fruit!

• Apply insights from behavioral economics (BE) to do better job of connecting employees with existing offerings

• Use communications, on-ramps, and menus• Few additional resources needed

• Prescription is method, not a recipe• Develop using BE insights and institutional knowledge• Test using gold-standard AB/RCT methods• Measure and learn• Tweak or re-design, and test again

Key takeaways

Today’s Plan & Background

• Show how this method works, using real and hypothetical examples

• Today’s talk based on experiences working on over a dozen marketing, messaging, and onboarding projects

• Companies of various sizes (mostly financial institutions)

• U.S. and abroad• Handful of completed projects• Many more underway

• More details• http://www.dartmouth.edu/~jzinman/ • http://www.poverty-action.org/ushouseholdfinance

Plan for today, background

• Focus on financial wellness • Happy to field questions about health, etc. later

• Focus on immediate source of stress/distractions• Lack of rainy-day savings• Debt load and repayment problems• Lack of plan, or engagement with one• (401k’s part of the problem here rather than a solution?)

• Why these focii?...

Plan for today, background

Many/most of your employees may be financially fragile:

• Lots of borrowing (overborrowing?)– Mortgage crisis– Bubbling student loan crisis? – More credit card debt than any economic model can explain – Share of consumers with subprime credit: 56.4%1

– More payday loans -> worse job performance (Carrell and Zinman)• Many without savings (undersaving?)

– Households with insufficient liquid assets to subsist for three months at the poverty line in absence of income: 43.9%2

– Households reporting no saving in the previous year: 48%3 • Many pay premia for financial services (overpaying?)4

– Assets (e.g., mutual funds)– Loans– Advice

Background: symptoms

Messaging solutions,with two examples

• Pain point for employees– low financial resiliency

• Pain point for employers– no direct offering. But do offer…• Crisis hotline• Financial planner• Online financial education• Payroll/prepaid card with savings bucket

• Approach: messaging, marketing, and/or process changes around these offerings

Rainy day savings solutions:smarter messaging

1. “If you make… deposits, you will receive [small yield incentive]”

2. “If you miss a deposit, you will lose [small yield incentive]”3. “If you make… deposits, you will receive [small yield

incentive] that you can use to reach your saving goal of [client’s goal]”

4. “If you miss a deposit, you will lose [small yield incentive] that you could use to reach your saving goal of [client’s goal]”

Results:1 and 2 push3 and 4 push3 and 4 >> 1 and 2

Messaging for rainy day savings

Test 1. Which works better at encouraging regular savings deposits?

1. Email every Friday re: the budget for that weekend2. Same as #1, but every other week3. Same as #1, but don’t start until 4 weeks after enrollment

Results:3 > 2 > 1

Messaging for financial resiliency

Test 2. Which works better at controlling discretionary spending among a sample of active HelloWallet users?

Many design elements, thousands of possible permutations:• Content• Amount of content• Timing• Frequency• Duration• Customization

What matters, and works best, depends critically on context• And context itself is a many-splendored beast!

Project underway to do work like this with dozens of companies worldwide. You can join us! • email jzinman@dartmouth.edu now!

Messaging design, why it’s hard

Messaging + Process Changes,

with three examples

Example 1. Rainy day savingsMessaging + process change example

• Present installment loan borrowers with the proposition: “You’re making monthly payments now… here’s an easy way to continue making those payments, to yourself, once the loan is paid off”– Framing: borrowing as habit formation for saving– Process change: give someone a one-page auto-transfer

authorization at an opportune time

• Doing this with 10 credit unions

• You could do this by messaging to employees with:– Payroll card with savings bucket– Own bank account (could offer when someone is filling out direct deposit

authorization for payroll)

• Join in our research! jzinman@dartmouth.edu

Pain point: student debt burdenPotential solution: messaging and on-ramps that connect employees with alternative repayment plans that reduce monthly payments

Pain point: repeat use of expensive debt productsPotential solutions: • messaging that informs and nudges before someone

reaches point-of-sale• on-ramps that connect with lower-cost, longer-term loans

(employer credit union, employer-intermediated loan, etc.)• messaging and on-ramps to PFM solutions (HelloWallet,

meeting with an adviser, etc.)

Example 2. Debt reduction

v0.0: matchingv1.0: auto- (opt-out) enrollmentv2.0: auto-escalationThese solve enrollment and contribution rate problems

They do not solve employee wellness problems

To solve for wellness need greater focus on:• Immediate needs, and liquidity to deal with them• Holistic needs (whole person, or at least more of her

balance sheet)• Wealth accumulation

Example 3.Behavioral 401k, v3.0

Add messaging that focuses on the whole, and the immediate

• Don’t borrow your way to 401k contributions• Do use 401k as a safety net if the alternatives even

pricier

Change menus, or add nudges, for wealth accumulation

• Eliminate or marginalize high-fee funds• Provide auto-diversification options

Change process to nudge active, informed decisions about 401k

• Enrollment (new employee on-boarding)• Open-enrollment

Behavioral 401k v3.0: for wellness

• There is low-hanging fruit!

• Apply insights from behavioral economics (BE) to improve employee (financial) wellness

• Using communications, on-ramps, and menus• Few additional resources needed

• Prescription is method, not a recipe• Develop using BE insights and institutional knowledge• Test using gold-standard AB/RCT methods• Measure and learn• Tweak or re-design, and test again

Key takeaways

Questions? Interested in working together? jzinman@dartmouth.edu

Follow-up