Employers and advisors alike can leverage retirement plan data to identify gaps within underserved communities, emphasized a recent panel during the NAPA 401(k) Summit this week.
Expert panelists touched on how plan data can enhance participants’ retirement savings needs, and especially among participants in underrepresented groups.
How data is housed presents a challenge to advisors and recordkeepers, as information on race and gender is generally self-identified through the employer but not collected in the same location as recordkeeping data.
By looking at research that factors gender and race, plan advisors can analyze how different groups are preparing for retirement and identify any disparities associated, such a lowered account balances and contributions or heightened loan activity. Identifying these disparities could trigger plan sponsors and advisors to enact beneficial changes to their plan design.
Tom Armstrong, vice president of Customer Analytics and Insight at Voya Financial, and who works with workplace plans to identify disparities, noted that even the best designs could have contentious factors. He described one plan that had successful metrics, but also had lower participation rates within Black and Latino communities. “Some of these plans actually looked really good, but these subsets weren’t great,” he said.
Since most recordkeepers don’t collect data on gender or race, it’s up to the plan sponsor to provide that participant information to third-parties. However, plan sponsors may be wary of handing over this information for fears of compliance or litigation risk.
Panelists in the session urged advisors to “build trust” with their employer by providing metrics that emphasize the influence of data-sharing practices, added Armstrong.
“Broadly, we’re not able to get data on race, gender, etc. It’s moved a little, but we have a lot more work to do,” he said. “Showing plan sponsors graphs and research papers and letting them know that this is another level of trust, but it will provide value.”
Other plan sponsors and committees might not understand the value that such data could bring. Inquiring about this information and voicing its importance during committee meetings, or even during the request for proposal (RFP) process, could shine light on whether employers are open to sharing this data. “The average plan committee is not going to wake up and say we should focus on this; some will need to be led there and show people how to do it,” added Christopher Cervantes, founder and managing partner of Valorous Advisors.
Advisors should also urge their colleagues to request this information from their plan sponsor clients, panelists said. Not only could it increase retirement savings and preparedness for these groups, but it could also drive business to the firm.
“What other advisor doesn’t want to increase their book of business?” remarked Beth Conradson Cleary, executive director of the City of Milwaukee’s Deferred Compensation Plan. “You show them what’s possible, and this is how we get there.”
Once advisors obtain this data and identify gaps, then they can organize strategies to improve upon the discrepancies. Janine Moore, senior vice president and retirement practice leader with HUB Retirement and Wealth Management, and who has worked with underserved communities to better their retirement readiness, expressed that retirement success lies in the combination of data analysis and the personalized approaches that advisors bring to both the clients and participants. “It’s the combination of the analytical tools and the hand holding,” she said.
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.