While we might be heading into 2017 feeling more than usually uncertain, one big issue for the new year is familiar: retirement plan participants’ confusion over how to make the most of their plan.
“They don’t feel like they’re knowledgeable. They don’t feel satisfied,” Nathan Fisher, head of Fisher Investments 401(k) Solutions, told ThinkAdvisor in a Dec. 21 interview. “They do care about retirement, [but] sometimes they can feel detached” from the planning process.
Fisher Investments commissioned KRC Research to survey over 1,000 401(k) plan participants to measure how well their plans work for them. It found that two-thirds of plan participants are not satisfied with their company 401(k) plan. Half said their provider doesn’t offer education and support, and two-thirds said it’s hard to pick the investments that will get them to their retirement goal.
Respondents recognize how valuable a 401(k) could be, though: the report found 80% believe employers that offer plan support are preferred places to work.
Fisher recommended three steps retirement plan advisors can do to overcome savers’ detachment from their employer’s plan.
Step 1: Make it Simple
Fisher described a 401(k) participant he met in central Michigan last winter while conducting enrollment meetings. She was a single mother working at a medical provider. “She trudges through the snow on her day off to come back into work with her two-year-old son to sit down with me and go through her retirement plan,” he said. “For her, this was really important, but for it to work for her, it had to be simpler.”
The survey found respondents were familiar with big-picture parts of their retirement plan like the 401(k) match and how to make allocation changes, but they were less sure of the nuts and bolts of their plan. Although 87% knew there was a withdrawal penalty on their plan, just 22% knew the age they could start making withdrawals without a penalty.
Less than a quarter of respondents knew what a mutual fund is. “Don’t talk to her about the pros and cons of different funds if she doesn’t know what a fund is,” Fisher said.
“People want this all to be much simpler,” he said. He suggested streamlining investment menus and offering things like automatic enrollment and QDIAs to simplify the onboarding process, but plan sponsors need to find a way to do that without overwhelming participants with jargon.
“I can tell you that plan sponsors need a QDIA and I can tell retirement advisors to do that, but that’s an example of jargon that participants don’t need to hear,” he said.
Step 2: Make it Trustworthy
The survey found a huge gap between the sources that plan participants use for information and how much they actually trust them. Although over half of respondents cited their company’s 401(k) plan provider as their most used source of retirement plan information, just 36% said they trusted that source. Participants were more likely to trust a friend or family member than an advisor, accountant or their HR rep.
Advisors who want to build up trust with retirement plan participants should make themselves available to meet with them, take their calls and answer their questions, whenever they have them.
“Is the advisor there to help the business owner or the manager, or is it an employee benefit? Meet with the employees,” Fisher urged. “If you can’t do that, hire somebody at your practice who can do that.”
He continued, “Do you answer the phone when they call? When they call with a question, do you call them back? That’s really where the basis of trust comes from: Are you there to help them or are you not there to help them?”
Even if advisors can’t meet with every participant in a plan, Fisher noted that when advisors make themselves available this way, employees talk about it with each other. The single mother he met with last year came in on a day off because she heard from her co-workers that it was a good plan, he said.
Step 3: Make it Useful
Because retirement advisors probably won’t be able to meet with every participant in every plan they advise, the smart use of technology is especially important.
About three-quarters of respondents said using financial calculators hasn’t been helpful in their retirement planning, the survey found. Compared to where they were five or 10 years ago, today’s retirement planning tools are “actually pretty good,” Fisher said. “People just want to understand how to use them.”
Advisors need more than just client-facing technology like retirement planning tools and calculators, though. Sophisticated CRM tools, email and marketing platforms, and video conferencing – and the staff to help manage it all – are critical to interact with and serve clients well.
“The trust element […] and the operational ability to fulfill” clients’ requests are both important for retirement advisors to meet their needs, Fisher said.