One of my recent reads is a fantastic book by Barry Schwartz’s — Paradox of Choice. Two of the key points in Schwartz’s book are that the more choices someone has, the less likely they are to make a choice and once they’ve made that choice, they have lower confidence that it was the right choice.

As for first hand knowledge, I experienced this recently during ethnographic research for a financial client (they do insurance and investment plans). We came across two types of situations.

A—Employers who only offered one option typically had enrollment/participation rates of 80-95% (e.g. they only offered a plan from Nationwide, Hartford, Vanguard, or another provider).

B—Employers who offered multiple options typically had enrollment/participation rates of 47-70% (e.g. they offered plans from a combination of Nationwide, Hartford, Vanguard, and or another provider). Most offered two, but we had one who offered four.

The worst situation we encountered was an employer who offered plans from four different providers for their 24,000 employees and only had a 47% enrollment/participation. The irony is that these are people who are consciously not participating in match plans. So, they definitely had incentive—free money—and yet over half the employees chose not to participate.

As to why they don’t participate? Well, there are a few reasons we uncovered:

1. The entire planning for retirement process is intimidating and scary.
2. The marketing packet they get from each provider is large. This leads them to believe that it’s a complicated process—more intimidation.
3. Add to #2 multiple packets and you get a compounded problem.
4. With multiple options, there’s more information to wade through and they don’t feel confident that they’re making the right decision.
5. After they’ve made a decision, they’re constantly questioning if it’s the correct one.

Numbers 4 and 5 are highlighted in Schwartz’s book.