Can an iPhone app
change how much money people put aside for retirement? Maybe, but its unlikely that even the designers of Putnam's [see profile]
new phone application believe that it is going to revolutionize retirement savings. Yet, the latest effort by the design team working on the reimagining of Putnam under Bob Reynolds and gang does reflect on innovations that have the potential to set Putnam apart.
| Edmund F. Murphy|
Managing Director, Head of Defined Contribution
This morning Putnam is taking the wraps off an application for the iPhone that allows people to compare prices between items by simply scanning the item's bar code. If you are an iPhone user and that app sounds familiar, it is because the comparison tool is nothing new. Indeed, Putnam licensed Occipatel's Red Laser app
to serve as the engine for their own. Red Laser is already a popular app with more than 9 million downloads.
Putnam added a twist to the Red Laser functionality. Not only does the Putnam take-off tell you where to buy the item for less. It also lets you save the difference between the price offered by the retailer where you scanned the item and that of the less expensive retailer down the block. Or, if you would like, you can tell the app to save the entire amount of the purchase price.
The save feature reflects an innovation Putnam made with the app; it interacts directly with the 401(k) recordkeeping platform that Putnam uses to run the employer's 401(k) plan. That interaction enables Putnam to make a one-time deferral into the plan for the amount the app user specifies.
There is one more twist to Putnam's latest trick: the app expresses all of the amounts as dollars of monthly income in your retirement.
Putnam's goal with the app and the tricks is to "give people pause, they will start to think about purchases in terms of retirement income," Ed Murphy, head of Putnam's DC business told the MFWire.com
during a recent demo of the service.
Retirement income has been Putnam's theme for more than a year. Last year, the mutual fund firm revamped its Web site to highlight monthly retirement income where most providers show the account balance. The site was also designed to encourage people to notice when they are falling short and take action through simple means such as sliders to change their situation.
Murphy says that the Web redesign is having the intended effect with as many as 30 percent of those people who visit the site having modeled scenarios using the retirement income tool. That group has also pushed their average deferral rate to 8.6 percent from 7 percent, a truly significant change. The iPhone app is an extension of this campaign to refocus people on retirement income and not their account balance. In short, to focus on the goal and not the moment.
Of course, the lofty goal does not mean that Putnam's new iPhone app will revolutionize the world in one step.
First, not everyone has an iPhone. Murphy does acknowledge that issue, guessing that 20-24 percent of the participants targeted by Putnam use one. He explained that the rollout strategy will target 401(k) plan sponsors that are paternalistic in outlook (those that are willing to take the extra step into pushing plan participants to save more today) and those plan sponsors from high tech industries whose workers may have an affinity for a cool app. Of course, those with iPhones who are app lovers may already have RedLaser on their phone.
Putnam is also working on porting the app to more platforms. The next stop will be Android. That project should be simplified by the fact that RedLaser already runs on Android.
The second hurdle is awareness. With a potential userbase scattered among islands of Putnam recordkeeping clients, the app is unlikely to go viral all at once. Instead the seed must be planted anew with every client. Here, Putnam is taking the traditional approach of enlisting plan sponsor help and reaching out to the participants directly.
Still, if even a small proportion of participants install the app or visit Putnam's Web site in response to the communcations it will help accomplish Putnam's goal.
"We want to drive participants to the Web and engage them," says explains Murphy.
To read more about Putnam's efforts, come back this afternoon and see "Part 2" [click here]
of this story. And to find out more about Reynolds' 401(k) strategy, see "Part 3" in our sister publication, The 401kWire [click here]
Company Press Release
BOSTON, June 6, 2011 — Putnam Investments today announced that it is launching the Putnam PriceCheck&SaveSM iPhone application for participants in 401(k) plans to help individuals understand the important relationship between current consumer spending and the potential impact it can have on future income in retirement.
The app enables participants in Putnam 401(k) plans to use their iPhone camera to scan the bar code of most sales items to register price, comparison-shop across other retailers to seek a lower cost, see the potential cost savings in terms of future monthly income in retirement, and immediately direct the price differential to the individual’s 401(k) account.
“Putnam’s PriceCheck&Save app is a powerful new way to demonstrate the eye-opening trade-off between spending today and its future financial impact on an individual’s retirement – translated through the critically-important language of income,” said Edmund F. Murphy, III, Head of Defined Contribution, Putnam Investments. “By using leading mobile technology, we are trying to change behavior from impulse spending to impulse saving – all with a few taps on their iPhone.”
Murphy explained that the larger educational effort motivating the launch of the tool is designed to showcase the harmonious present-day connection between thoughtful purchasing and the ability to save for the future, by looking through the lens of retirement income. “Putnam is hoping to create greater understanding in the marketplace about the critically important relationship between individuals’ spending of current income and saving of current income on their future retirement income. Spending and saving do not need to be mutually exclusive activities.” he noted.
Continuing Focus on the Language of Income
Putnam’s proprietary Lifetime IncomeSM Analysis Tool helps advisors and their clients model how much monthly income their savings might generate in retirement and determine whether investors are on track to maintain their current lifestyle once they stop working. Early use by participants in Putnam-managed 401(k) plans shows that a significant number of employees changed their savings deferral rates.
At the end of December 2010, nearly 34 percent of 401(k) participants who interacted with the firm’s Lifetime IncomeSM Analysis Tool made changes to the amount of income they deferred to retirement savings; 80 percent of the changes were deferral increases; and the average savings rate increase was approximately 23 percent, from 7 percent of income to 8.6 percent. The figures are based on initial results*, which confirms the research that was instrumental in creating the tool, according to Putnam.
Putnam Investments and Retirement
Since Robert L. Reynolds, a 30-year retirement savings industry veteran, became Putnam’s President and CEO in 2008, the company has deepened its commitment to the retirement market and launched a series of innovations and initiatives to meet emerging customer needs. In recognition of its leadership in retirement savings, Putnam was named the inaugural recipient of the “Retirement Leader of the Year” award at the 2011 annual Mutual Fund Industry Awards.
In addition to such initiatives as the Lifetime IncomeSM Analysis Tool, Putnam also has announced plans to launch a suite of income-oriented mutual funds that aim to help advisors work with retirees in developing strategies for monthly income flows, at varying levels of risk tolerance, to flexibly address their changing lifestyle financial needs throughout retirement.
Putnam RetirementReady® Funds, the firm’s suite of 10 target-date/lifecycle retirement funds, were the first suite of lifecycle funds to integrate Absolute Return Funds, which seek positive returns over a period of three years with less volatility than has been associated with traditional asset classes that have earned similar rates of return. Employed in retirement portfolios, Putnam Absolute Return Funds** are intended to pursue positive returns in up and down markets, to help protect against the harmful effects of adverse investment returns and to seek to reduce volatility.
About Putnam Investments
Founded in 1937, Putnam Investments is a leading global money management firm with over 70 years of investment experience. The firm was recently named one of the top 15 mutual fund families by Lipper/Barron’s for the second consecutive year. At the end of May 2011, Putnam had $129 billion in assets under management, including mutual fund assets of $70 billion and institutional assets of $59 billion. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore and Sydney. For more information, visit putnam.com.
Putnam mutual funds are distributed by Putnam Retail Management.
* Research is based on initial data gathered from the activity of 10,000 participants in Putnam defined contribution retirement plans, including nearly 3,000 participants that interacted with the Putnam Lifetime Income Analysis Tool at the end of December 2010.
**Putnam’s Absolute Return Funds are not intended to outperform stocks and bonds during strong market rallies.
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