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Plan Sponsors Want More Guidance From Advisors: Fidelity

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What You Need to Know

  • Workplace retirement plan sponsors are demanding more from their advisors to improve participant outcomes.
  • The COVID-19 pandemic affirmed the need for plan sponsors to help employees prepare for the unexpected in retirement.
  • Plan sponsors and advisors also look at other benefits that employees value, such as financial wellness programs and HSAs.

In the midst of the pandemic, workplace retirement plan sponsors demanded more advisor guidance and expertise as they strived to support their employees, Fidelity Investments reported Thursday.

Fidelity’s study found that plan sponsors continue to focus on improving participant outcomes. In the past two years, 88% made changes to their investment menus and 82% made changes to their plan designs.

“The past year has affirmed for plan sponsors that their commitment to helping employees prepare for the unexpected in retirement has never been more important and reinforced their desire for strong employee outcomes,” Liz Pathe, head of defined contribution investment only sales at Fidelity Institutional, said in a statement. 

“Plan sponsors are seeking expertise from their plan advisors not only to help guide and inform their investment menu and plan design, but also to help employees strengthen their financial well-being.” 

The online survey was conducted in March among 1,169 plan sponsors on behalf of Fidelity Investments without the firm being identified as the survey sponsor. Respondents were identified as the primary person responsible for managing their organization’s 401(k) plan, and they confirmed that their plans had at least 25 participants and at least $3 million in plan assets.

Advisor Value Drivers 

In 2020, advisor satisfaction and value remained high among plan sponsors at 73% and 69%, but advisor value perception fell 10% year over year among smaller plans, according to the survey. 

Fidelity noted these top three drivers of advisor value: 

  • Helps improve employee outcomes.
  • Helps improve employee satisfaction.
  • Provides financial advice and guidance to participants. 

The number of plan sponsors that reported they are looking to change advisors jumped from 16% in 2020 to 34% in 2021. 

The main reason for wanting to change plan advisors was a desire for better employee communication and education, followed by lower stated fees, more retirement expertise and a better investment lineup. 

The scope of guidance and expertise that plan sponsors expect from their advisors continues to expand, the survey found. Forty-six percent of sponsors said they were also looking for their advisor to have more expertise in helping minimize costs, 44% to select and monitor investment options for the plan and 42% to keep them informed on regulatory changes and how to implement them. 

“Plan advisors should take an active role in engaging both plan sponsors and their employees to emphasize the value of their plan and educate them to help improve outcomes,” Pathe said. “Otherwise, they might risk losing clients to an advisor who provides better education and guidance.” 

Retirement Readiness 

Sixty-eight percent of plan sponsors surveyed said their employees are saving enough for retirement, up from 59% in 2020.

At the same time, 86% of respondents believe that at least some of their employees are delaying retirement because of a savings shortfall, and 60% believe the pandemic influenced their employees’ decision to retire. 

Fidelity noted that plan sponsors continued to support their employees and contribute to their retirement savings amid the challenges of the pandemic, with only 16% reporting that they had reduced the employer matching contribution over the past two years. 

Plan sponsors’ goals for their plans are largely employee-focused, and 72% said their plan is meeting its goals this year, up from two-thirds in 2020. 

Supporting Employees’ Full Financial Picture 

Plan sponsors and plan advisors continue to look at programs beyond the retirement plan because they recognize the importance of these benefits for employees, according to the survey. In fact, advisors who discuss topics such as financial wellness and health savings accounts with plan sponsors appear to earn higher satisfaction scores. 

Seventy-six percent of plan sponsors who have discussed financial wellness programs with their advisors reported being very satisfied with their advisors, compared with 65% who have not had those discussions. Seventy-eight percent of plan sponsors said they were very satisfied with their advisors who had initiated discussions of HSAs, versus 62% whose advisor had not done so. 

Asked how they were addressing rising health care costs, half of plan sponsors said they were implementing wellness programs to help employees improve or track their health, and 44% were making changes to the health plan to lower company premiums. 

Seventy-one percent of respondents reported that their advisor had spoken to them about a financial wellness program, and 62% said they had implemented one in the past two years. Seventy-three percent reported a strong effect from these programs for employees, up from 61% last year. 

Seven in 10 plan sponsors said their advisor had spoken to them about HSAs, and 78% considered advisor HSA guidance important. Plan sponsors offering HSAs have seen increased enrollment, the survey found, with 55% of employees enrolled in an HSA, up from 40% in 2020.