Measuring Success: KPIs for Goals-Based Investing in Employer-Sponsored Plans

Introduction

Goals-Based Investing (GBI) focuses on aligning investment strategies with participants’ specific financial goals rather than just benchmark-relative performance. In employer-sponsored retirement plans, this approach can enhance participant engagement, improve outcomes, and foster better retirement readiness. To ensure the effectiveness of GBI, plan sponsors and advisors should track relevant KPIs.

Key KPIs for Goals-Based Investing

1. Participant Goal Engagement Rate

Definition: Percentage of participants who have set clear financial goals within the plan’s investment platform.
Why it matters: Higher engagement indicates participants are actively planning for their financial future, a core principle of GBI.
How to measure: (Number of participants with defined goals) ÷ (Total participants) × 100

2. Goal Achievement Rate

Definition: Percentage of participants on track to meet their stated financial goals within the expected timeframe.
Why it matters: Reflects the effectiveness of the investment strategy and participant behavior aligned with goals.
How to measure: (Number of participants projected to meet goals) ÷ (Participants with goals) × 100

3. Retirement Readiness Score

Definition: Composite metric assessing participants’ preparedness for retirement based on factors like savings rate, investment allocation, and projected income replacement ratio.
Why it matters: Provides a holistic view of whether participants are on track for retirement.
How to measure: Often provided by plan analytics tools combining multiple data points into a single score.

4. Contribution Rate Trends

Definition: Average participant contribution rate to the plan over time.
Why it matters: Increased contributions often correlate with improved goal attainment.
How to measure: Track average % of salary contributed quarterly or annually.

5. Asset Allocation Alignment

Definition: Percentage of participants whose investment allocations align with their stated goals and risk tolerance.
Why it matters: Ensures participants’ portfolios reflect their objectives, reducing risk of underperformance or excessive risk-taking.
How to measure: (Number of participants with aligned portfolios) ÷ (Participants with goals) × 100

6. Plan Participation Rate

Definition: Percentage of eligible employees actively participating in the retirement plan.
Why it matters: Higher participation increases the likelihood of participants benefiting from GBI strategies.
How to measure: (Number of active participants) ÷ (Number of eligible employees) × 100

7. Loan and Withdrawal Rates

Definition: Frequency of participant loans and early withdrawals from the plan.
Why it matters: High rates may indicate financial stress or disengagement, potentially undermining goal achievement.
How to measure: Track number and percentage of participants taking loans/withdrawals annually.

8. Participant Satisfaction and Confidence

Definition: Survey-based metric assessing participant satisfaction with the plan and confidence in meeting their financial goals.
Why it matters: Positive sentiment can drive engagement and adherence to investment strategies.
How to measure: Regular participant surveys with scoring on satisfaction and confidence levels.

9. Plan Sponsor Cost Efficiency

Definition: Cost per participant for managing the GBI program.
Why it matters: Ensures the program is financially sustainable and provides value.
How to measure: Total program costs ÷ Number of participants

Best Practices for Tracking KPIs

Regular Reporting: Monitor KPIs quarterly or semi-annually to track trends and identify areas needing intervention.
Segment Analysis: Break down KPIs by demographics (age, tenure, salary) to tailor communication and strategies.
Integration with Education: Use KPI insights to enhance participant education and support.
Technology Utilization: Leverage plan platforms and analytics tools for real-time KPI tracking and personalized participant insights.

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