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Americans Determined To Save More - But Will They?

by Eric Daugherty

This recent article by Money Management Executive details that the financial crisis has led the majority of Americans to resolve to set a financial goal for 2010. Resolutions are good. However, every year I resolve to save more, eat less, grow three inches, get better looking, and become funnier. So far - no good. Aspirations only go so far.

Asset management firms have a prime opportunity to help investors fulfill their resolutions - and grow their own client bases and assets as a result. The key challenge is how to get people to sacrifice gratification now for betterment later. While not exactly a parallel, research into solutions for classic "Tragedy of the Commons" problems sheds some light on the ways in which firms can help investors keep these resolutions.

People will sacrifice today for an unclear positive outcome down the road if they are armed with:

• Information - knowledge as to why their resolution to save and invest is a wise one, and how to do it best
• Identity - a sense of belonging to something important and special
• Institutions - belief in the institutions that help them
• Incentives - rewards for positive behavior

How could this look in the investment management space?

Firms could - and should - strive to promote:

• Programs of education and affirmation, multi-channel, multi-media - on the web, radio, TV, to both clients and prospects alike;
• A sense of belonging to a special club, both within their firms and as part of the larger community of like-minded investors. Social media is an ideal tool to carry out this vision;
• Absolute assurance that their firm is committed to doing the right thing, above reproach, and both economically and ethically healthy;
• While we cannot pay clients to invest with us, we can help them help themselves by devising ways to make better decisions - default 401(k) contribution elections are one example, automatic transfers from checking to savings in the banking world is another.

Firms have a unique opportunity - but one that may recede. I am at the gym every day. The first three weeks of the year, the gym is packed with those who have made New Year's resolutions. By February, there is no longer a wait for the equipment.

Investors have been shell-shocked into resolving to change their behaviors. Firms who can capitalize and help investors follow through on their resolutions will benefit the investors and themselves.