During a recent class on investing basics she taught to a group of women, Kristen Euretig, a financial advisor in Brooklyn, New York, was asked many questions about 401(k) plans. Her audience even asked if she could come back and teach a special class on the basics of 401(k)s and retirement planning.
“They told me that they would log into their 401(k)s, but they did not know what was going on or what to do,” Euretig said. “Actually, I wasn’t really surprised because in my experience, most people seem totally lost when it comes to 401(k) plans. When I help my clients with their 401(k)s, I often have to go back and forth with them to get the information that I need because they don’t understand why it’s relevant, and they just don’t know where to find that information.”
It’s been 30 years since 401(k) plans were introduced into the marketplace, and though the space has come far in terms of efficiency and transparency, company retirement plans still have a long way to go to act in the best interest of participants. Increasing participation rates and plan monitoring are still a challenge, and in today’s highly regulated world, the onus on plan sponsors to act as fiduciaries and ensure that participants can meet their objectives in the most meaningful and efficient manner is even greater than before, said Shelby George, senior vice president of Advisor Services at Manning & Napier.
Fortunately, progress in technology now makes things easier, George said, and allows fiduciaries to really fine-tune their understanding of their 401(k) plans and participants. Today, there are technology solutions that help better identify clients’ needs at different life stages and give plan sponsors the ability to customize messages that facilitate savings in a way that wasn’t possible before.
Technology can also provide services to better customize managed account portfolios based on the ages of plan participants, their investment objectives and how far from or close to retirement they are, she said.
“There is a lot of innovation when it comes to technology — new services and capabilities — and all of us are trying to keep pace with the innovations as they come,” George said.
Technology and the DOL Fiduciary Rule
The DOL regulations have upped the ante on what it means to actually manage a retirement plan in a way that benefits participants and their long-term retirement success, said Pete McNellis, senior vice president of dailyVest, a fintech company. One of the main components of that endeavor is identifying which funds offered in retirement plans are performing well, which are not and which may be too expensive. This is an important factor, McNellis said, in making sure that plan participants can meet their individual retirement goals.
“It could be that an individual participant is young, for example, and has had a consistently low-return portfolio that may require an intervention,” McNellis said. “Without technology, though, who knows that and who can tell? Our technology makes it easier for fiduciaries to reach out to people with those kinds of interventions.”
DailyVest’s new PlanAnalytics OneClick Dashboard helps retirement plan administrators take a more informed and proactive approach to managing their plans’ health, while bringing together the flexibility of anytime-anywhere plan management through online access via computer, tablet and smartphone. PlanAnalytics reduces the complexities associated with compiling and analyzing raw plan data needed to assess plan health, and the OneClick Dashboard displays key plan metrics such as participation, investment diversification and contribution rates to show where defined contribution plans are succeeding and where they might need help.
“We gather and consolidate data for everyone in a plan and run a lot of calculations, not only from the standpoint of the median point of return of everyone in that plan, but also on the participation rate [and] whether the target date funds in the plan are diversified. The kinds of factors that many fiduciaries would agree are indicators of plan success are the things we have our eye on, and that we look at the data for, in order to come up with good analytics,” McNellis said.
As fiduciaries look to make retirement plans more successful for all participants, one of the more important factors they should be paying attention to, in George’s view, is participants’ ages.