While most financial advisors don’t specialize in serving 401(k) plan sponsors, clients are increasingly looking to their advisor for 401(k) related guidance, and plan sponsors are increasingly using financial advisors to help optimize plan design and maximize the benefits the plan delivers for their employees.
The 2022 refresh of Fidelities “Plan Sponsor Attitudes Survey” presents several findings that suggest there may be no better time for advisors to be well versed and capable of serving this market:
47 percent of plan sponsors are considering changing advisors, hitting an all-time high
88 percent of plan sponsors anticipate making changes to plan design, the most active in years
93 percent of plan sponsors plan to make changes to their investment lineup—including ESG
Meanwhile, a 2022 Rebel & Co. study for Morgan Stanley found that the most desired changes (listed above) require the kind of expertise plan sponsors are increasingly looking to a plan-associated financial advisor for help with.
A few of the most noteworthy findings include:
Expertise Matters: While all employers, regardless of size primarily expect a 401(k) associated advisor to provide plan design and investment offering guidance, smaller employers want an advisor who will also serve as a valuable resource for their employees and larger employers expect advisors to provide investment oversight and administrative support as well
Reputation and Employee Support Matter Most: Plan sponsors reported the following as the primary reason for choosing their 401(k) provider
Resources/tools for employees (37 percent)
Historical success/reputation (26 percent)
Plan was already in place (14 percent)
Previous relationship with advisor (14 percent)
Pricing (8 percent)
When It Comes to Prospecting, Start Early: Nearly half of plan sponsors agreed that the best time to consider adding a financial advisor supported plan is prior to the company having 100 or more employees, while only 14 percent of those looking for solutions will use an existing advisor relationship
Some additional insights from the Morgan Stanley study findings:
95 percent of plan sponsors agree that having a dedicated financial advisor with a workplace retirement plan is worth the cost
87 percent agreed that the company, as a whole, has better plan outcomes with an advisor
And 86 percent saw higher employee participation and more eligible employees being put on-track for retirement with advisor involvement
With the demise of corporate pensions, investors are increasingly on their own to navigate retirement savings. But with a labor market that remains robust and competitive, recent data indicates that employers are more willing to pay for expertise and support.
Plan sponsors are adding and paying for advisor-based support to boost plan participation and success, and those who have already taken that step report (almost universally) that the results have been well worth the investment. This implies that this is a trend we can expect to continue and that the demand for advisors well-versed in this area will continue to grow.
Christy Charise, Founder & CEO of Strategic Advisor
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