A few months ago, Fidelity released a research report on its 401(k) plans and participants. As Fidelity hoped, the report received ample attention, particularly concerning the asset allocation of its participants. Less noticed, however, was a tidbit about its participants' Internet usage. As of January 2000, 52% of Fidelity's participants reported that they had last communicated with the company by using the Internet, 38% through an automated telephone service, and 10% via a human telephone representative.

Remarkable! Only a decade ago, the pattern would have been utterly reversed. Human representatives fielded the vast majority of calls, with automated services just beginning to overcome complaints that they "trapped" users in a modern version of limbo. The Internet, of course, was the refuge of college students and computer hobbyists. No 401(k) provider remotely considered the medium as a communications tool.

Compare this pace of change with the rate of transformation elsewhere in America. Items such as school curricula, dinner menus, banking methods, and television-viewing tastes, to name just four of several thousand candidates, have changed only modestly over the past 10 years. For the most part, teachers still follow the same lesson plans, we still chow on chicken and beef, we bank via ATMs and people, and we watch similarly cheesy sitcoms. We don't, however, interact with our 401(k) provider in the same way.

The 401(k) business is different for two reasons. First, defined contributions are new. Americans have yet to form generation-long habits. Second, and of more importance, from the point of view of the participant the change has been entirely for the good. For many people and many purposes, the Internet is superior to a conventional telephone call, because unlike with telephone conversations Internet applications are visual. Sometimes, a picture is indeed worth 1000 words-especially when the words come from a faceless, anonymous representative. And on those occasions when a true discussion is needed, today's participants differ from 1990's in enjoying the luxury of choice. They may select the communications process that best works for them.

Of course, the change has also been attractive to plan providers, since putting up an Internet program costs much less than supporting a bevy of telephone operators. Which brings me to the central lesson of Fidelity's statistic: In the 401(k) space, new technology works. As an automated, mass-customized experience, the business lends itself to technological solutions, and the participants are eager and willing to alter their habits. Providers and sponsors who recognize this reality will continue to lead the marketplace. Those that don't, will inevitably be left behind.

The views presented in this article represent those of the author and do not necessarily represent those of InvestmentWires, Inc. InvestmentWires, Inc. does not guarantee the accuracy, completeness or timeliness of, or otherwise endorse, these views, opinions or recommendations, give investment advice, or advocate the purchase or sale of any security or investment.

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE