Academic journal article The Journal of Consumer Affairs

US Retirement Financial Services Advertising's Financial Information Provisions, Communication Strategies and Judgmental Heuristic Cues

Academic journal article The Journal of Consumer Affairs

US Retirement Financial Services Advertising's Financial Information Provisions, Communication Strategies and Judgmental Heuristic Cues

Article excerpt

Retirement savings and investments have been two of the most important financial service vehicles for American consumers' futures in recent years. With this backdrop, policymakers and consumer educators need retirement financial service providers to play the crucial role of helping consumers make economic decisions with regard to retirement plans and ultimately build retirement assets. This research of how retirement financial services advertising attempted to inform, communicate and persuade investors during the past four years (2006-2009) includes two crucial events in the US retirement marketplace--the Pension Protection Act of 2006 and the 2007/2008 US financial crisis. A content analysis examined the type of information, the communication strategies and the judgmental heuristic cues presented in a total of 1,430 retirement financial service advertisements in six national US business-finance magazines from 2006 to 2009.

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A notable accumulation of evidence suggests that the United States is on the crest of a perfect storm with: (1) the largest number in history rapidly approaching retirement, (2) the longest life expectancy of citizens, (3) the most assets for which consumers are personally responsible for making last their lifetime and (4) a range of new retirement income products (Eriksson 2007). Indeed, an aging population and the increasing demand on retirement income have made consumer retirement savings a significant economic phenomenon and a focus of US governmental agencies, consumer educators and financial services providers. Thus, they have made numerous efforts to improve the ability of consumers to navigate their own financial paths for retirement (Engelhardt and Kumar 2007).

Owing to recent changes in retirement market regulations and economic conditions, retirement financial services are more important for US consumers than ever before. For example, since the Pension Protection Act of 2006, a range of new retirement financial products has been introduced to average consumers affecting their overall individual investment portfolio options (Meredith and Salter 2008). However, in the fall of 2008, due to the economic crisis triggered by excesses and defaults in subprime lending and housing markets, a variety of financial companies extricated themselves from the home-equity-line-of-credit business which simultaneously had negative influences on all retirement plan participants (Investment Company Institute 2010). Furthermore, since the Pension Protection Act of 2006, governmental agencies such as the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC) have asked financial companies to provide accurate and sufficient information and to communicate with their customers in an optimal way to improve consumer decision making and to enhance consumer financial well-being (Bone 2008; Warren 2008).

With the importance and growth of the retirement marketplace, retirement financial services providers (RFSPs) have increasingly used advertising as a communication tool to reach, inform and persuade customers (Koehler and Mercer 2009). Research has indicated that financial services advertising can increase the likelihood of an individual to choose an appropriate financial plan by informing consumers of the consequences of inappropriate retirement management (Diacon and Hasseldine 2007; Jordan and Kaas 2002). Wiener and Doescher (2008) have stressed that advertising presented to consumers can affect their knowledge and perceptions during the stage of prepurchase information search for retirement savings options and in high-stake decision-making situations. However, other research has noted that financial services advertising provides insufficient financial information and employs communication approaches which can lead to biased perceptions of financial offerings as well as oversimplified decision making among consumers (Estelami 2009; Huhmann and McQuitty 2009). …

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