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.”