Three-quarters of retirement advisors believe recordkeeping technology is outdated and needs an overhaul, according to a survey released Monday by Vestwell. Over half said user experience was their biggest challenge using recordkeeper technology. Forty-eight percent cited lack of integrations and 45% said high fees were the biggest tech challenges they faced with their current providers.
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Vestwell conducted the survey in August among 434 advisors who sell retirement plans and 164 plan sponsors on the company’s platform.
Cost vs. value
The survey found 53% of advisors cited customer service as the most important factor in choosing a provider for their clients’ retirement plans, followed closely by the users’ experience (52%). Cost was a distant third at 38% of advisors.
Advisors may be underweighting the importance of cost to their clients. Fifty-seven percent of sponsors said it was the most important factor in choosing a retirement plan provider, tied with user experience. Those two factors were more important even than their advisor’s recommendation (43%). Meanwhile, only 38% of sponsors agreed with advisors that customer service was one of the most important factors in selecting a plan provider.
“While it’s not necessarily surprising that plan sponsors put a greater emphasis on cost than advisors — after all, they’re the ones paying for the plan — the discrepancy is quite significant (57% versus 38%). But what we find even more interesting is the discrepancy between how advisors and sponsors perceive value, with 35% of advisors putting value amongst the most important reasons for picking a provider versus only 21% of plan sponsors,” Aaron Schumm, founder and CEO of Vestwell said.
Advisors see their role as an educator and guide, with 26% saying investment education was how they provided the most value to their clients, and 17% who pointed to their recommendations and monitoring of plan design. However, Vestwell found a gap in how tech-minded advisors and others see their value.
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Of the three-quarters of advisors who called for a recordkeeping tech overhaul, 29% said education was how they gave their sponsors the most value, compared to 16% of other advisors. Meanwhile non-tech advisors see themselves as problem solvers, as 27% said they provide the biggest help for their clients when they run into issues with their plans, compared to 13% of tech-savvy advisors.
He continued, “Advisors clearly understand that a low-cost plan without the quality to support it creates more headaches, and ultimately increased cost, for their clients.”
Vestwell also examined differences in perspectives between employers who were sponsoring their first retirement plan, and those who were converting a plan.
“Nearly 70% of first-time plan sponsors found a user-friendly experience to be paramount versus only 49% of converted plans. Likely because more experienced sponsors feel comfortable with the basics of operating a 401(k),” Schumm said. He said that sponsors who were converting a plan “appeared to care more about solving the root of [clients’] problems.”
Sponsors who were converting a plan placed a much higher emphasis on payroll integrations (40% versus 23% of first-time sponsors) and fiduciary oversight (23% versus 15% of first-time sponsors), Schumm pointed out.
“It’s clearly important for advisors to understand their client’s pain points and speak to them. However, 89% of sponsors believe their advisors bring value to their plan and that begins with recordkeeping selection,” according to Schumm. “By helping clients understand the nuances of plan management and the risk of under-indexing critical areas of execution, advisors start the relationship off with what they do best — advising.”
Vestwell identified new services that retirement plan advisors were thinking of offering over the next 12 months:
- Financial wellness tools — 44%
- MEPs and PEPs — 33%
- Managed accounts —27%
- HSAs — 26%
- Guaranteed income products —22%
- Account aggregation —15%
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Danielle Andrus works as an editor for The Financial Planning Association® (FPA®). Over the past 15 years, she has worked in various capacities, including writing and editing. Andrus has worked for several notable publications and outlets and spent more than seven years as the executive managing editor at ALM Media, publisher of Investment Advisor magazine and ThinkAdvisor.com. Before that, she was online editor for Summit Professional Networks, where she oversaw newsletter development for four magazines, including Benefits Selling, Senior Market Advisor, Boomer Market Advisor, and Bank Advisor.
