There are thousands of 401(k) retirement plan advisors out there—what makes you different? Can you articulate it without hesitating? Do you actually say something, or is it 30 seconds of buzzword mumbo jumbo?
They’re all salient questions that new research from MassMutual attempts to dissect. The Enfield, Connecticut-based company (?) finds employers that sponsor retirement plans are more likely to work with a financial advisor who offers a specific value proposition of capabilities and services, but it’s something few advisors are able to articulate.
“Our study shows that advisors often aren’t practiced in succinctly articulating their added value,” Elaine Sarsynski, executive vice president with MassMutual Retirement Services and Worksite Insurance, said in a statement. “There are clear opportunities for advisors to enhance their practice management to reflect plan sponsor preferences.”
As part of the MassMutual Winning Combination Study, employers or “plan sponsors” were presented with a handful of different retirement plan advisor “personas,” each with a distinct value proposition, and asked to choose what combination of values would be most helpful in managing their retirement plan. Overall, plan sponsors say they prefer to work with a plan advisor who emphasizes employee education, good customer service and reducing plan costs as core to his or her value proposition:
Education: Employee education and advice is universally valued by employers, with many saying they want more frequent educational sessions for employees from advisors. However, advisors say employers are not always willing to make time for their employees to participate in educational meetings.
Service: Being responsive and accessible, listening and responding to needs, and resolving problems are the keys to good service, employers report. Plan review is especially important as a service to employers that rely on advisors.
Cost: Employers want advisors to help lower the overall costs of the retirement plan, including negotiating with providers, reducing investment fees, and attracting more assets to the plan to keep costs low. The importance of costs was relative, however, as employers that did not currently work with an advisor emphasized costs more than employers that do work with an advisor.
The “winning combination” of values is especially important to smaller retirement plan sponsors with less than $25 million in assets, according to the study. Sponsors with $25 million to $75 million in assets confirm those values are important but say they have broader needs. Larger sponsors are more likely to want help from advisors with additional services and capabilities, specifically advice on plan design, investment selection, fiduciary support and help with other benefits.
Overall, MassMutual’s study finds that 93 percent of employers say their retirement plan advisor is valuable, especially when it comes to customer service, advice on investments and problem solving.
Employers that rely on an advisor to support their retirement plan are more likely to be:
- Engaged in promoting retirement plan participation and employee financial wellbeing overall,
- Confident their employees are saving enough for retirement, and
- Active in reviewing their retirement plan, including investment performance and education effectiveness.
However, employers also say that their advisors can do a better job on some fronts, including educating employees in group meetings, providing insights on how to lower overall plan costs, and providing information on new developments for retirement plans, according to the study. Smaller employers with plans of less than $1 million in assets say they need help in keeping up with new developments.
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.
