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Retirement Planning > Retirement Investing

Crisis of Confidence Hits Retirement Plan Participants: J.D. Power

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A crisis of confidence exists among U.S. retirement plan participants, J.D. Power reported Thursday.

A study based on responses of 8,332 retirement plan participants fielded in February and March found that a mere 17% of plan participants said they felt very confident in their retirement preparedness.

That number fell to 15% among baby boomers, who are currently entering retirement at a rate of roughly 10,000 per day, the study noted, citing a report on BenefitsPro.

J.D. Power said many retirement plan providers need to rethink their approach to both digital tools and human advisors in order to build plan participants’ confidence.

“Understanding the drivers of confidence is critical for retirement plan providers because it’s directly linked to roll-in and rollover decisions,” Mike Foy, senior director of wealth management intelligence at J.D. Power, said in a statement.

Foy said that when plan participants feel confident about their retirement, they are much likelier to bring assets to their primary plan from other sources, and to keep those assets with the provider after leaving their current job.

“To build that confidence, providers need to deliver an effective combination of high-quality human interaction, useful online tools and thoughtfully designed digital self-service options,” he said.

The survey found that overall satisfaction with retirement plan providers was some 220 points higher (on a 1,000-point scale) when plan participants said they were very confident in a majority of the 11 areas related to retirement measured in the study, compared with those who said they were not confident at all in at least one area. These are the areas in which participants expressed confidence (or not):

  • Knowing how much money needed for retirement
  • Knowing how to calculate money needed for retirement
  • Knowing how much money needed for health care expenses in retirement
  • Being financially ready for retirement
  • Keeping up with inflation in retirement
  • Not outliving assets
  • Leaving money for heirs
  • Decision about amount of money contributed
  • Decision about selected investments
  • Decision about allocation of assets
  • Decision about money saved through plan vs. money saved outside of plan

Among study respondents who identified as very confident in a majority of areas, 46% said they definitely would keep assets with their provider, either in the plan or a rollover, after leaving their job. Forty-seven percent reported that they had rolled in assets to their primary firm.

Most retirement plan participants reported using a combination of website, mobile and phone channels to interact with their plan providers. However, when awareness and/or usage of mobile capabilities is limited, J.D. Power said, providers are missing an opportunity to both increase participant satisfaction and reduce dependency on more expensive service channels.

Satisfaction increases dramatically among participants who actively use the mobile channel, not only for reviewing information but also for transaction and communication, it said.

According to the study, retirement plan participants have the highest levels of overall satisfaction, 877, and confidence in a majority of areas when they are actively engaged with their retirement plan provider across multiple channels, including online retirement tools, digital self-service options and professional advisors.

Satisfaction Rankings

The study, now in its second year, evaluates participant satisfaction with providers of group retirement plans based on six factors: interaction across live and digital channels; investment and service offerings; fees and expenses; plan features; information resources; and communications.

Plan providers are ranked in three categories based on their overall mix of business in terms of average plan size. Here are the high scorers on group retirement plan satisfaction:

Large Plans

  1. Charles Schwab – 821
  2. Nationwide – 811
  3. Bank of America – 809
  4. T. Rowe Price – 800
  5. Vanguard – 795

Medium Plans

  1. Bank of America – 836
  2. Fidelity Investments – 814
  3. Nationwide – 813
  4. Vanguard – 780
  5. Prudential Financial – 776

Small Plans

  1. Fidelity – 790
  2. Nationwide – 789
  3. John Hancock Retirement Plan Services – 745
  4. MassMutual – 743
  5. Principal Financial Group – 743

— Check out 8 Mistakes Retirees Make That Harm Their Retirement on ThinkAdvisor.


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