In exchange for a free Chipotle CMG, -3.44% burrito, would you share your 401(k) login information? One company is hoping you will.
Blooom, a company that manages retirement accounts for a monthly fee, on Friday offered $10 Chipotle gift cards to new users with 401(k) or 403(b) accounts — in exchange for having their account diagnosed by the site as either “healthy” or “unhealthy,” a process that requires handing over the username and password for the online retirement account. Then, if a consumer decides to hire Blooom, the company will manage the account, including reallocating retirement investments to cut down on investments with high costs. (Individuals can log into Blooom and change their own allocations as well).
It may sound risky to let strangers login to what may be the only way you are saving for retirement. But offering a burrito may not be a bad strategy: Research says although consumers say they are uncomfortable handing over personal information to companies, they will often do it if there is a reward involved.
“People seem to be influenced much more by small discounts than economists would think they should or would be,” said Peter Huang, a professor and chair at the University of Colorado Law School, who has written about the way consumers make choices.
Because many people are influenced by “status quo bias” — happily keeping things the way they are — offering an incentive can be an effective way to overcome that, said Victor Ricciardi, a finance professor at Goucher College in Baltimore, and the co-editor of the book “Investor Behavior: The Psychology of Financial Planning and Investing.”
Consumers are understandably skittish about the amount of personal information they share online. More than 90% of adults Pew Research Center surveyed in 2013 said they agree consumers have lost control of how their personal information is collected and used by companies. And in the same study, few adults said they felt confident that various organizations, including credit-card companies and the government, could keep their records private and secure.
Still, when offered a benefit, a significant portion of adults said they thought disclosing personal information was acceptable. For example, almost half of the adults Pew surveyed in a separate survey in 2016 said they would be willing to let a grocery store track their shopping habits and sell it to third parties in exchange for a loyalty card that saves them money on purchases.
Consumers are also willing to share personal information in exchange for small perks such as discounts on movie theatre tickets or coupons for free food and beverages at movie theaters, according to a 2012 survey from financial services company PricewaterhouseCoopers.
Of course, sharing a username and password for a financial account is an especially sensitive kind of personal information. By Friday afternoon, the number of people who took advantage of Blooom’s promotion was “in the hundreds,” although they had set a cap of 5,000 gift cards for the day, the company said. Blooom’s president, Greg Smith, said the company, which launched in October 2014, uses secure protocol and doesn’t store users’ credentials until they decide to hire Blooom to manage their accounts. (Of course, the offer doubles as a relatively cheap marketing gimmick too.)
For investors who are squeamish about handing over control of their account, there are other options. They may do well to look into their retirement fund allocations; some 56% of 401(k)s are not appropriately allocated, according to Fidelity. And people who are not active investors, as a general rule, should look at funds with lower expense ratios.