For many employees and executives, their 401(k) plans have become a large part of their retirement savings. The plans are also important for employers, though, according to a June 2008 survey of senior finance executives. In the survey, conducted by CFO Research Services and Charles Schwab, respondents indicated that the plans contribute to the underlying business as well:
- 84 percent agree that a 401(k) plan is necessary for recruiting and retaining a high-quality workforce;
- 67 percent believe that offering a 401(k) plan to employees enhances the company’s corporate reputation; and
- 58 percent feel a 401(k) contributes to the long-term financial success of a company.
The study also revealed concerns that finance executives have about their plans’ success: 80 percent of respondents cited the varying levels of financial literacy among their employees as a challenge to future growth in plan participation.
For financial advisors looking to grow their 401(k) business, the survey found that 87 percent of the employers feel it is important to provide employees with investment advice to help them make at least some decisions. More than half (55 percent) of the companies plan to support that belief by increasing the amount of time and money they commit over the next five years to ensuring employees are ready for retirement.
Schwab spokesperson Michael Cianfrocca says the study contains several key findings of interest to advisors. First, the overwhelming number (87 percent) of senior finance executives believes investment advice is an important feature to offer to employees as part of a 401(k) plan. There are several different ways this advice could be delivered, and advisors can play a key role in this process.