Advisors better stay on top of their game or they risk having plan sponsors replace them, if new research from Fidelity is any indication.
The number of plan sponsors that reported they are looking to change advisors more than doubled in the past year (34% in 2021 versus 16% in 2020), according to the just-released 12th edition of Fidelity’s Plan Sponsor Attitudes Study.
The study notes the percentage of sponsors looking to switch advisors has not been this high since the DOL Fiduciary rule came into play in 2017.
The top 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 study generally revealed that in the midst of the COVID-19 pandemic, there was a heightened demand for advisor guidance and expertise as workplace retirement plan sponsors became increasingly focused on supporting their employees.
The scope of guidance and expertise that plan sponsors expect from their advisors continues to expand. Sponsors were also looking for their advisor to have more expertise in helping minimize costs (46%), selecting and monitoring investment options for the plan (44%), and keeping them informed on regulatory changes and how to implement them (42%).
“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. Otherwise, they might risk losing clients to an advisor who provides better education and guidance,” said Liz Pathe, head of defined contribution investment only (DCIO) sales, Fidelity Institutional.
Focus on improving participant outcomes
Although advisor satisfaction (73%) and value (69%) remained high in 2020, advisor value perception was down 10% year-over-year among smaller plans. The top three drivers of advisor value from plan sponsors included: 1) helps improve employee outcomes; 2) helps improve employee satisfaction; and 3) provides financial advice and guidance to participants among the top rankings.
Fidelity’s study revealed that plan sponsors continue to focus on improving participant outcomes with 88% making changes to their investment menus and 82% making changes to their plan designs in the past two years. The study, which began in 2008 and surveyed employers that offer retirement plans using a wide variety of recordkeepers, found an increase in plan sponsors’ desire for their advisors to directly engage more with their employees.
“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,” Pathe said. “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.”
Retirement readiness through, beyond pandemic
More than two-thirds (68%) of plan sponsors feel employees are saving enough for retirement, up from 59% in 2020. However, 86% of plan sponsors believe at least some of their employees are delaying retirement due to a savings shortfall, and nearly two-thirds (60%) believe the pandemic had an impact on their employees’ decision to retire.
Importantly, 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 reduced the employer matching contribution over the past two years. Plan sponsors’ goals for their plans are largely employee-focused, and nearly three-quarters (72%) believe their plan is meeting its goals this year, up from two-thirds in 2020.
Better bring up that HSA
Plan sponsors and plan advisors continue to look at programs beyond the retirement plan recognizing the importance of these benefits for employees. In fact, advisors who discuss topics such as financial wellness and HSAs (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 (versus 65% who have not had those discussions). More than three-quarters (78%) of plan sponsors stated they were very satisfied with their advisors who raised the topic of HSAs (versus 62% who have not had HSA discussions).
When 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 plan sponsors reported that their advisor had spoken to them about a financial wellness program, and 62% have implemented one in the past two years. Nearly three-quarters (73%) of plan sponsors reported a strong impact from these programs for employees, up from 61% last year.
Seven in 10 (71%) plan sponsors reported their advisor had spoken to them about HSAs, and more than three-quarters (78%) find advisor HSA guidance important. Plan sponsors offering HSAs have seen increased enrollment, with more than half (55%) of employees enrolled in an HSA, up from 40% in 2020.
About the survey
The 2021 Plan Sponsor Attitudes Study was an online survey of 1,169 plan sponsors conducted in March 2021 on behalf of Fidelity, which was not identified as the survey sponsor. Respondents were identified as the primary person responsible for managing their organization’s 401k plan. All plan sponsors confirmed their plans had at least 25 participants and at least $3 million in plan assets.
Additional information on the survey, as well as resources and tools—including fund analytics and details on investment options—can be found at go.fidelity.com/attitudes.
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Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
