Change the conversation: Employers need to make retirement planning more accessible

At a recent Employee Benefit Research Institute webinar, experts on retirement planning emphasized the importance of making advising more accessible to workers to help improve their financial literacy and wellness.

The webinar was built around EBRI’s “2022 Spending in Retirement Survey.” The survey’s results demonstrated the value of professional retirement planning, while also showing that it remains underutilized. Among the findings, 37% of those with an employer-sponsored retirement plan as a major source of income and 36% of those who work with a financial advisor were able to retire earlier than expected because they could afford to take that step vs. just 16% of those with low financial knowledge.

“The trust in both advisors and employers is very evident throughout the survey, when we look at these different cohorts,” said Bridget Bearden, research and development strategist, EBRI. “And also it does appear that many of the retirees that had access to these services and plan types did fare better than those that did not have access or did not take advantage of the tools available to them.”

Those working with a financial advisor showed higher levels of financial knowledge than others. For instance, 72% of those working with an advisor knew about annuities as a retirement income strategy versus 58% of overall respondents, and 71% of those working with an advisor were aware of the use of dividends and interest from an investment portfolio for retirement income versus 48% of overall respondents. As a child of the 1980s, James Veneruso, senior solutions strategist, DC, LGIM America, said the survey reminded him of the famous catchphrase of the TV show “G.I. Joe” – “Knowing is half the battle.”

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“Something that permeated the whole survey is that those who were working with an advisor tended to be better off and better placed for retirement,” he said.

In terms of accessibility and improving participation among workers, Veneruso said key questions to ask are, “How do we democratize this process/?” and “How do we make accessibility to advice easier?” About 1 in 3 survey respondents relied on an advisor and 1 in 4 used online or employer-provided resources for information on transitioning to retirement.

“How can we boost those numbers and see better outcomes for everyone?” Veneruso said.

Veneruso noted that retirement plan sponsors have “a wealth of data” that can help them identify where there are gaps among workers in participation and then determine the reasons for the gaps. For instance, he recalled a client whose night staff were participating in the retirement plan at low rates because they did not have access to lunch seminars being held about the plan.

Debra A. Gates, manager, advice and wellness, CAPTRUST, said advisors and employers need to make progress to demonstrate the help they can provide to all workers and to make it feel accessible to them. Too often, she said, a portion of workers do not believe they fit the profile of someone who qualifies for professional financial advising.

“Advisors have to change the conversation,” Gates said. “Yes, it’s about retirement, but not just about retirement – it’s what do you do on your way to retirement?”

Gates said that means centering the conversation more around financial wellness and topics such as spending habits, budgeting, debt and emergency savings, among other issues.

“It’s about focusing more on the day-to-day on your way to retirement so that you can have a better conversation,” Gates said. “It’s changing that narrative to financial wellness, making it more holistic, and meeting people where they are to have those conversations.”

Gates said it starts with employers. She said employers hold an inherent place of trust with their workers and have a responsibility to provide readily accessible financial guidance to them. Too often, “it’s not inclusive,” she said, nor is it directed to meet the needs of the broader population.

“Plan sponsors have to take on that responsibility, irrespective of if they want that responsibility or not,” Gates said. “Employees look to their employer for guidance, because they know that their employer is going to bring in someone who’s vetted and who can relate to them. And so, plan sponsors will have to open up and be more receptive to bringing in someone that’s going to give holistic, unbiased and customized advice to a participant – not trying to sell them anything, but to help to educate them and help to take them to the next level. That’s going to be the responsibility of employers.”