401(k) Advisors from Mars, Sponsors from Venus?

Communication is key.

Communication is key.

They’re just not seeing eye-to-eye. 401k plan sponsors generally consider participants more retirement-ready than do 401k advisors, according to a new study from Voya Financial.

Sponsors also focus on 401k plan process, whereas advisors focus on participant outcomes. And 401k sponsors are more likely to rate their involvement with investment selection higher than advisors perceive.

It all adds up to a disconnect between the perceptions of plan sponsors and the 401k advisors with whom they work.

According to the company, the goal of the survey, “Sponsor Perceptions of Retirement Plan Services: Challenges and Opportunities for Advisors,” was to better understand what sponsors want from advisors in terms of services and support, as well as to identify unmet needs and emerging opportunities.

The study also surveyed 401k advisors to provide insight into how sponsor and advisor perceptions align.

Helping plan participants become retirement ready is an important concern for 401k sponsors, but they place less emphasis than advisors on the means to achieve it, e.g., participant education, enrollment, communications and increasing savings rates.

Plan sponsors are concerned with operating their plans and avoiding potential liabilities; the study shows if the plan is running smoothly and employees are contributing, sponsors tend to believe participants are preparing effectively for retirement.

By contrast, 401k advisors look at potential outcomes and can see participants generally are not saving enough or investing wisely enough to provide for their retirement income needs.

Nearly half of advisors say participants are “poorly prepared” for retirement, whereas only one in six plan sponsors agrees. Seven in 10 sponsors say participants are “somewhat prepared” to retire, and four in 10 advisors concur. Yet only one in six sponsors and one in 10 advisors say participants are “well prepared” for retirement.

In other findings, plan sponsors cited the challenges of meeting compliance requirements as a major concern over the next two years. Other significant challenges respondents cited included educating plan participants, increasing participant savings and managing plan expenses.

“Our research found plan sponsors were most concerned with plan fees, the retirement readiness of participants and investment performance,” Michael De Feo, head of Retirement and Investment Only at Voya Investment Management, said in a statement. “While advisors agreed that plan fees were a top priority, they also thought sponsors were more concerned with managing plan complexity and less concerned about participants’ retirement readiness.

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