What do plan sponsors really think of the advisor community? Meghan Jacobson, CFA, Head of J.P. Morgan U.S. Insights Program, provided answers during a breakout session Monday at the Excel 401(k) Conference in Dallas, starting with why they want proactive advisors.
Jacobson shared data from J.P. Morgan’s 2019 plan sponsor research findings, providing insight into plan sponsors’ goals and philosophies in providing retirement benefits, considerations driving plan-related decisions, and actions underway to help employees reach retirement success.
The survey is conducted every other year, and includes input only from key plan sponsor decision-makers for small, big and mega-sized plans. The data helps advisors understand how goals and actions can be linked to maximize the number of employees prepared for a financially secure retirement.
The survey, titled “The Power of Being Proactive,” is geared toward positioning more participants for greater retirement funding success. It highlights how proactive plans and proactive advisors are more likely to offer industry best practices and experience higher levels of overall satisfaction across a broad range metrics.
Jacobson also pointed out how to overcome plan sponsor pushback on plan design innovations such as auto-enrollment and auto-escalation.
“You come up with really good ideas, but companies push back,” Jacobson said, adding that plan sponsors are worried employees will rebel against the auto-movement, but the research finds that is not the case.
She noted that more than half of plans are now offering auto enrollment, and fewer, but still a remarkable gain, are offering automatic escalation.
“We think offering automatic escalation can be a really effective way to save more as their salary grows,” Jacobson said.
She shared a slide illustrating that if a plan participant starts at a 3% salary deferral rate and just stays there, they will not get where they need to go for a secure retirement. But if they start at 3% and escalate to 10% over the next 7 years, they are going to fare much better in the long run.
Without automatic contribution escalation, research finds many automatically enrolled participants simply keep their contributions at a minimal rate, around 3%, across their entire careers—far below the general 10% rule-of-thumb retirement savings rate recommended by most industry experts.
Jacobson mentioned how the research makes a strong case for advisors being proactive in suggesting new ideas and sharing best practices to evolve 401k plans, as well as how plan sponsors with proactive partners feel more secure about their decisions and their advisors.
Plan sponsors with proactive advisors also tend to be much more confident in their understanding of fees, as well as more apt to offer proactive plan features. The research found 73% are confident they receive value for the fees they are paying, compared with 58% for plan sponsors with less proactive advisors/consultants and 47% for plan sponsors without advisors/consultants.
Jacobson concluded by saying plan sponsors today expect more, participants need more, and advisors are expected to do more.
All in all, a pretty strong case for being a proactive advisor.
SEE ALSO: Revealed! ‘Top Advisor By Participant Outcomes’ at Excel 401(k)
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
