Malvern, Pa.-based Vanguard is taking a closer look at participant behavior within retirement plans.
The company unveiled the Center for Investor Research (CIR) earlier this week, dedicating it to the examination of individual investor behavior.
"We know that successful investors exhibit smart behavior—they keep costs low, diversify their portfolio and refrain from trading," said Vanguard CEO Bill McNabb in a statement. "Investor behavior is at the heart of successful outcomes, and the aim of our new center is to advance the case for better investor outcomes through research and experimental techniques in an increasingly digital world."
Rather than focusing on optimal allocations or investment selection, the center will focus on optimizing the savings behavior of plan participants.
Vanguard says the CIR will also design experimental interventions to improve investor outcomes.
The CIR’s efforts will build on previous behavioral finance research that proved the efficacy of auto-enrollment and escalation within plans.
For example, Vanguard recommends that defined contribution plans offer participants digital “nudges”—personalized guidance on savings rates provided to participants online, which can then be implemented through a simplified, streamlined process, preferably with one click.
In addition, the CIR will offer plan research like “How America Saves,” a publication that tracks the defined contribution space.
The CIR will also examine the ways digital environments, like web and mobile platforms, impact investor behavior.
The research topics include investor expectations for returns, the role of trust in advisor-client relationships and transitioning from saving to distribution in retirement.