“There has never been a more challenging time to invest for retirement.”
It’s quite the lead from the latest U.S. Retirement Plan Participant Satisfaction Study released by J.D. Power, but it’s not necessarily wrong.
Blaming a combination of unprecedented market volatility and complex new rules involving contributions, withdrawals and tax implications, the survey and data giant says there’s a need for increased guidance and advice on the part of retirement plan providers.
Additionally, with record job losses in recent months, “much of the money accumulated in these plans may potentially be lost if participants choose another provider for a rollover,” something few providers are successfully addressing this growing need.
“The COVID-19 pandemic struck the U.S. right in the middle of the fielding period for this study, and it is crystal clear in our data that, as market turmoil increased, investor sentiment and economic outlook declined sharply,” Mike Foy, senior director of wealth management intelligence at J.D. Power, said in a statement. “This left many retirement plan participants searching for answers and guidance that was simply not provided by their provider. At this critical time, plan providers are largely failing to provide the guidance needed by participants to make smart decisions to help them prepare for retirement.”
Among the 2020 findings:
Retirement investors not receiving advice
Just 27% of retirement plan participants say they have accessed professional financial advice related to their plan, and 29% are either unaware of whether such advice is available or perceive that it is not available to them.
Low engagement erodes satisfaction
Nearly one-fourth of retirement plan participants say they’ve had no interaction with their provider during the past 12 months. This is a problem for providers because the frequency of interaction is directly correlated to participant satisfaction, the company notes.
Overall satisfaction scores increase 44 points (on a 1,000-point scale) when participants say they’ve had one to four interactions per year with their retirement plan provider. Satisfaction scores increase by 99 points when participants engage 21 or more times per year with their retirement plan provider.
Satisfaction linked to rollover retention
Increased levels of unemployment and employment turnover will drive a surge in roll-in and rollover decisions during the coming weeks and months.
Among participants who say they are “delighted” with their retirement plan provider, 51% say they “definitely will” retain assets in their current plan. That percentage falls to just 12% when participants who say they are “indifferent” with their plan and to 7% among those who are “dissatisfied.”
Personalized communication helps, few delivering
Proactive, personalized digital communications can have a positive effect on participant satisfaction. For example, communication satisfaction scores are 70 points higher when participants receive personal communication via their retirement plan provider’s mobile app than when they receive a traditional email.
However, just 15% of retirement plan participants indicate having received this type of digital communication.
“It’s impossible to overstate the financial implications for firms that get the participant satisfaction formula right during this make-or-break moment,” Foy added. “Historically, some plan providers have been focused only on the plan sponsor and, while that is changing somewhat, firms need to be laser-focused on participants as well.”
Study rankings
In the large plan segment, Bank of America and Charles Schwab rank highest in a tie, each with a score of 801. Principal Financial Group (789) ranks third.
In the medium plan segment, Bank of America ranks highest with a score of 827. Charles Schwab (825) ranks second and OneAmerica (800) ranks third.
In the small plan segment, Fidelity Investments ranks highest with a score of 797. AIG Retirement Services (787) ranks second and Nationwide (782) ranks third.
The study, now in its third year, evaluates participant satisfaction with providers of group retirement plans, such as 401ks, based on six factors: interaction across live and digital channels; investment and service offerings; fees and expenses; plan features; information resources; and communications. Plan providers are ranked in three categories based on their overall mix of business in terms of average plan size.
Large Plans
Medium Plans
Small Plans
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
