The one person plan sponsors most want to hear from when it comes to helping them make decisions surrounding guaranteed lifetime income solutions is their plan advisor, according to research from Pacific Life.
Unfortunately, some retirement plan advisors don’t feel ready to offer advice about this growing yet underserved market segment. It’s time to get ready, and be proactive in your efforts to engage plan sponsors on retirement income education.
This issue was at the heart of a session during the Retirement Plan Advisor Summit Central in Chicago on Monday, titled, “Hot Tips! How Advisors Can Leverage the Latest Participant Research: Using Lifetime Income to Win New Plan AND Wealth Management Clients.”
The research shows that nearly 4 in 10 retirement plan participants believe they are currently being offered an option with guaranteed lifetime income (GLI), and 8 in 10 of those believe they are currently contributing to it. This is, of course not actually the case. The same research found only a quarter of plan sponsors (26%) say they already have an income option in place, while nearly half are seriously researching or planning to implement one.
And more than anyone else, plan sponsors say they want their advisor to help them determine whether or not to add a guaranteed income solution, and if so, which solution(s) would fit best for them.
In fact, when asked who is going to help them make a decision, the research found plan sponsors are overwhelmingly their most trusted source of information for retirement income, with 52% saying so. The plan provider/recordkeeper was next (41%), followed by an independent group that evaluates such options. And plan sponsors are twice as likely to listen to their advisor as opposed to the GLI provider (26%).
Session speaker Chris Stout, Head of National Markets, Pacific Life, said that with so many different retirement income solutions becoming available recently, it has created a bit of “analysis paralysis” – the inability to make a decision to due overthinking and an abundance of choices, leading to indecision and inaction as plan advisors and sponsors seek the perfect solution while fearing making the wrong choice. He said it reminded him of the confusion surrounding the introduction of target-date funds decades ago. But now there are some effective tools that can help advisors guide plan sponsors and participants to making the right decision for them.
“Having a process to help them select these is a huge differentiator whether or not your client is ready to adopt,” Stout said. “There are some great comparison tools out there. There are tools that will help you guide to those types of solutions.”
He mentioned tools like Nestimate as an example, the Kelby Meyers-led Retirement income analytics provider which recently launched the Retirement Income Score(k), called RIS(k), an innovative actuarial and investment modeling tool that allows plan sponsors, fiduciaries, and financial advisors to evaluate the impact of in-plan annuities at the plan and participant level.
While the research shows plan sponsors want to hear from advisors on retirement income choices, session speaker Karen Casillas, Vice President, CAPTRUST, noted that participants are ready to listen as well.
“So much of this is how do you engage and connect with people. Something I’m super proud of at CapTrust is with our financial literacy program. 76% of the time that we engage with a participant one-on-one, they actually make the changes we recommend,” Casillas said. “So how do we continue to get that better and better? My clients want to know if we’re doing things like this—if we’re really engaged with the latest research. And then they want to know, ‘how does that apply to me?’”
One way is tracking—the psychology behind progress tracking and how it engages the brain’s emotional centers to deliver instant gratification while keeping a person on course for ambitious long-term outcomes.
The Power of Tracking, the first of three papers in a series, presents Pacific Life research conducted in collaboration with Michael Finke, PhD, CFP, and AGEIST.COM to help sponsors and advisors better understand how offering a lifetime income option may attract, motivate, and retain an engaged, optimistic workforce—ultimately driving positive outcomes for both plan sponsors and participants.
Stout noted during Monday’s session that so-called “trackers” – those who track their health and retirement – are more likely to envision a retirement well into their 80s and 90s. “When they have that stronger connection to their future self, they are more apt to make current sacrifices in order to hit those goals,” Stout said. “They are more engaged, more optimistic, more goal-oriented and exhibit stronger decision-making skills. If you offer solutions that your ‘trackers’ are attracted to, then you will be able to attract and engage more productive employees.”
SEE ALSO:
• Top Retirement Plan Advisors Gathering in Chicago Next Week
• Nestimate Introduces In-Plan Annuity Evaluation Tool