Using data science to enhance the customer experience
By Adam Hunter
In her 29-year career at Prudential Financial, Inc., Sue Unvarsky has learned the retirement
business inside and out—starting in an entry-level role in claims processing and now serving as chief operating officer for Prudential Retirement’s Full Service Solutions. Yet even she was surprised to discover how an internal analysis of transactional volumes revealed a cyclical threat to her customers’ financial futures.
Every August, customer calls and related transactional requests would spike in one category of transaction: hardship withdrawals.
“I walked into the job thinking, well, December and January must be the busiest time of year for this and that’s what everyone else was assuming,” Unvarsky says. “We started to track and gather that data out of all the different systems and what we found out very quickly was that it’s actually tuition reimbursement requests that drive much of the volume around hardship withdrawals.”
It’s no secret that college tuition costs are higher than ever, but the hidden phenomenon that Unvarsky and her team uncovered may be compounding the problem. Customers may believe they are investing in the future when they make a hardship withdrawal from their retirement account to fund education for themselves or their children, but in most cases, it sets them further back than they’d be if they pursued other options.
The Internal Revenue Service defines a hardship as “an immediate and heavy financial need” for medical care, purchase of a principal residence, prevention of eviction, burial or funeral expenses, repair of damages to a principal residence, or payment of tuition. Nearly a third of 401(k) plan participants nationwide have taken funds from their plan before retirement (including loans and hardship withdrawals), a PricewaterhouseCooper’s 2017 Employee Financial Wellness survey found.
“If you take out a $50,000 hardship withdrawal, it decreases your final savings by roughly $100,000 over the next 12 years assuming a 6 percent return on savings,” Unvarsky says.
Unvarsky and Prudential used the accumulated data to change their operations and customer experience approach. To manage the teams that process these transactions, staff vacations are now limited in August, and trainings, workshops, and special projects are scheduled for other months. Call center representatives are trained to understand if someone is calling for a hardship withdrawal as a last resort, or if they may need guidance about the different types of vehicles they can use for tuition. Low-interest student loans, financial aid programs, or even a loan against their defined contribution plan (which can be paid back) are sometimes recommended, preserving retirement funds for their intended purpose.
To help reduce the need for hardship withdrawals, Prudential offers online financial wellness resources and tools to its 4.2 million workplace customers. It also works with companies and organizations to run on-site seminars where employees can discuss financial topics face-to-face with advisors.
“Our data analysis started out with a focus on managing the operation, not necessarily the communication and the education around retirement,” Unvarsky says. “However, that ‘Aha!’ moment not only allowed us to more efficiently staff our operations, but also to contribute to our customers’ knowledge about the downside of hardship withdrawals and the other options available to them for paying tuition expenses. It’s the perfect example of how operational discipline can lead to better outcomes for our customers.”
Frances Denmark, 973-802-4603