Four Innovative Ideas to Help Canadians Save

Wealth industry professionals know Canadians aren't saving as much as they could; they see it every day. Research from CIBC finds that consumers know it too; 82% of Canadians think they could save more if they cut back, and on average, they think they could save another $360/month, without even "feeling the pinch."

Helping Canadians save more is good for your business. After all, the assets that drive your revenue ultimately come from people choosing to save, rather than spend, a portion of their earnings. Put another way, if Canadians save less, your growth aspirations are facing a stiff headwind.

A major cause of the problem is that humans aren't wired for the delayed gratification that saving requires. We want what we want, and we want it now! Fortunately, the science of behavioural economics now offers us a toolkit for designing products and services that can counteract this innate programming. The toolkit is built on the premise that people's behaviour can be influenced by presenting information and decisions in different ways. It's called "nudging" and countless studies have proven that it works.

We gathered the key learnings from these studies and designed a workshop to help wealth industry professionals apply them. Last month, thirty leaders from across the industry participated in the inaugural session, and they produced some groundbreaking ideas. Here are some highlights:

• The Saving Score – An app that analyzes transactions to evaluate saving behaviours like a credit score assesses credit-worthiness. Users are benchmarked against others “like them” and provided with personalized recommendations for improving their score and regular updates to measure progress.
• The Smart Piggy-Bank – A youth savings account that automatically segments balances between money that can be spent and money for long-term savings. Voluntary contributions to the long-term savings envelope are automatically matched by parents.
• The "Yelp" for Financial Advice – A platform that simplifies the process of finding a trusted advisor by allowing clients to post and share ratings and reviews that can be searched by various criteria.
• Embedded Goal Amplifier – A tool that increases the motivation to save by helping consumers express their goals creatively and in vivid detail. The tool is embedded in an existing habit or device (eg. Facebook, FitBit) to make it easy for the saver to engage. It increases commitment to the goals by sharing them with family and friends to enlist support and social pressure.

I love how each of these ideas tackle unique aspects of the saving challenge; however, they all have one key thing in common: Make. Saving. Easy. They do this by "nudging" people to save in three ways:

Simplify Choices & Actions:

• The Smart Piggy Bank reduces the number of decisions the saver must make by embedding default percentages for saving and spending. The user doesn’t have to think about how much to save. Parental matching is also simplified by automation.
• The Yelp for Advisors simplifies advisor selection criteria down to one key thing – “Do other people like me trust this person?”
• The Saving Score removes the effort of figuring out whether one needs to save more and where to cut back. The score tells you how you stack up and provides personalized recommendations based on your spending patterns.

Reduce Perceived Sacrifices

• The Smart Piggy Bank removes the need for the user to restrain themselves from spending money earmarked for saving because only funds in the spending envelope can be withdrawn.
• The Saving Score makes it easier to save by defining a range of acceptable saving behaviour that applies subtle social pressure (ie. “If everyone else is saving x% of their earnings, I will too”).

Amplify Perceived Benefits

• By making goals vivid and meaningful, and keeping them visible by integrating with existing habits, the Goal Amplifier keeps the user’s eyes on the prize (and drowns out competing priorities).
• By pushing regular progress reports, the Saving Score gives the user an ongoing feedback loop that inspires engagement and continuous improvement.

These principles may seem obvious, but this HBR article by Shlomo Benartzi highlights how success lies in the details. In an experiment aimed at getting consumers to enrol in an automatic saving program, users were randomly assigned to one of three categories: saving $5 every day, saving $35 a week or saving $150 a month. While only 7% opted to save $150 a month, nearly 30% decided to save $5 a day. That’s a huge shift in choices, when the amounts are all essentially equivalent. Does your organization consider this level of detail before communicating with customers? Do your product owners consider these types of nuances in designing how they go to market?

Canadians KNOW they need to save. The industry needs to stop TELLING people to save and start HELPING them do it. Firms that pay attention to these details will benefit from increased loyalty, share-of-wallet and ultimately AUM.

More detail on how behavioural nudges can be used to help your customers save - and grow your AUM - can be found in our white paper, entitled "Why The Wealth Industry is Broken - And How to Fix It."