Advisors can consider starting with conversations around retirement income goals: Seven in 10 sponsors reported setting a goal for retirement income. (Photo: Shutterstock)
How much do you need to save for retirement? It's one of the most common questions we hear, yet so difficult to answer given the many variables involved: When you're planning to retire, how much you plan to spend and so many other factors.
Americans are bombarded by guidance from many sources – but their plan sponsor is one important resource.
|Ready for retirement
Plan sponsors are increasingly focused on making sure their plans are effectively financially preparing employees for retirement, according to Fidelity's 2018 Plan Sponsor Attitudes Study.
This year, they reported retirement readiness as their top concern (last year it was reducing plan costs), and that's a positive shift to see – yet, that probably means they're looking for guidance themselves on how to help employees prepare.
Plan sponsors told us that the number one reason they hired advisors was to better understand how well their plans are working for employees, and how they can improve them.
|One plan sponsor; several plan expectations
An advisor will work with a variety of roles within a plan sponsors' organization – from the CEO to human resources or finance groups – and these job functions have varying expectations.
For example, the CEO is most interested in an advisor's ability to help comply with fiduciary responsibilities. On the other hand, those in HR look for the ability to understand the needs of their company and employees.
That being said, this theme actually stood out as the only common priority in the top four expectations across job functions: They all want advisors to help them better understand what their company and employees need.
|The advisor opportunity
So, what does this mean for advisors? Ninety-two percent of plan sponsors are working with advisors, which is an all-time high. But sponsors are not afraid to switch advisors if their needs are not being met.
In fact, 44 percent of sponsors revealed they have hired a new advisor within the last four years.
Advisors can consider steps to improve sponsor satisfaction, and that ranges from administrative tasks to being transparent about services.
Plan sponsors reported higher satisfaction levels with advisors who did the following versus those who did not:
- explain their costs (34 percent higher)
- ask the plan sponsor for feedback (22 percent higher)
- demonstrate their value (20 percent higher)
- and provide a written statement of services (25 percent higher).
But the conversation shouldn't end there. With plan sponsors' focus on employee's retirement readiness, plan advisors can also add value by proactively sharing knowledge and opportunities to help plan participants financially prepare.
Advisors can consider starting with conversations around retirement income goals: seven in 10 sponsors reported setting a goal for retirement income. Fidelity suggests 45 percent is a reasonable income replacement goal to help maintain a pre-retirement lifestyle throughout retirement, but 37 percent of plan sponsors reported a goal of less than 40 percent.
Plan advisors can help sponsors set appropriate frameworks for these goals and consider options like target-date solutions that are aligned with their plans' income replacement goals.
Additionally, advisors can look for ways to help participants get more engaged. Many sponsors are making changes to plan design (82 percent) and investment menus (83 percent) in an effort to help their employees reach retirement savings goals.
Pan sponsors that added or changed a matching contribution (the top change to plan design) did so to increase employee participation (56 percent) or improve savings rates (47 percent).
Or, advisors can consider suggesting features like auto-enrollment; 87 percent of employees stayed in plans with an auto-enrollment default of 5 percent or higher, and 68 percent reported being “very satisfied.”
My biggest takeaway from all of this? Advisors have a tremendous opportunity to add value to the plan sponsors they support, going beyond the basics of the plan sponsor/plan advisor relationship.
The outcome that matters most is positioning more participants to be retirement ready. But—tactical discussions around regulatory changes, plan performance, plan costs and fiduciary responsibility remain important as ever.
So, when plan sponsors receive all of those questions from participants about saving for retirement – advisors can help them be prepared.
Jordan Burgess is head of specialist field sales overseeing defined contribution investment only (DCIO) sales at Fidelity Institutional Asset Management.
The content provided herein is general in nature and is for informational purposes only. The views expressed in this article reflect those of the speaker and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Investing involves risk, including risk of loss. Products and services provided through Fidelity Institutional Asset Management® (FIAM®) to investment professionals, plan sponsors and institutional investors by Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917. © 2019 FMR LLC. All rights reserved. 871908.1.0 READ MORE:
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