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Advisors Say Retirement Plan Recordkeeping Needs an Overhaul

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Vestwell, a digital retirement platform, surveyed 434 financial advisors and 164 plan sponsors in August to find out how they align, where they diverge and how they determine current trends in retirement.

Three out of four advisors in the survey said recordkeeping technology should be overhauled. Vestwell noted that their beliefs, versus those who believe that recordkeeping tech is fine as is, affected additional responses across the survey.

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For example, 45% of those who believed a tech overhaul was necessary also said high fees were one of the biggest challenges when working with other recordkeepers, versus 28% of the status quo advisors. Similarly, 52% of the former cited poor user experience as a major challenge, versus 33% of the latter.

In general, Vestwell said, advisors who want change have higher expectations of recordkeepers. They want the recordkeeping process to be self-service so that they can spend their time in the most valuable way by educating participants.

The surveys found that both advisors and sponsors agreed on the top three reasons to select a plan provider — excluding sponsors who said they chose a plan because their advisor recommended it:

  • Strong customer service: advisors – 53%; sponsors – 38%
  • User-friendly experience: advisors – 52%; sponsors – 57%
  • Cost effectiveness: advisors – 38%; sponsors – 57%

Advisors and sponsors reported using different metrics to determine the success of their plan. Sixty-one percent of advisors cited plan participation rates as a top factor, versus 39% of plan sponsors.

For their part, sponsors were more focused on the administrative side, citing no administration errors 60% of the time and minimal time managing a plan 59% of the time.

Asked what they thought was the greatest value they brought to plan sponsor clients, 26% of advisors said educating plan participants about 401(k)s and 403(b)s and investment decisions.

Related: How Much Value Does a Financial Advisor Deliver?

The question was reframed for plan sponsors who were asked what was advisors’ greatest value to them. Thirty-eight percent of sponsors offering their first plan and 19% of conversion sponsors said education on effective administration was of greatest value to them — only 10% of advisors chose this option.

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