Advice tech platforms give 401(k) participants a bird’s-eye view of their financial future

Engaging plan participants in retirement planning has been a persistent challenge for plan sponsors, and thus increased engagement is often a top priority, as noted in the Plan Sponsor Council of America’s yearly survey. Hindered in part by a lack of financial awareness and literacy, many individuals fail to grasp the importance of saving for retirement, creating an uphill battle for themselves and plan sponsors. Let’s delve into the enduring hurdles that plan sponsors face and explore the transformative potential of timely, age-based advice, as delivered by advicetech platforms, to help plan sponsors and participants overcome these challenges.

The tailoring of timely, age-based advice

Central to engaging participants in their retirement planning is delivering age-specific advice at the appropriate time, tailored to align with pivotal life events and financial milestones. As individuals move through life, the financial advice they receive should evolve to meet their shifting needs and opportunities – age-based advice like this is predictable and can be automated. For example, when workers turn 50, they can make catch-up contributions in certain retirement funds, and thus increase their tax-advantaged savings and investing rate.

However, despite their potential to bolster retirement savings, catch-up contributions are often underutilized, with 84% of eligible investors failing to make catch-up contributions to their retirement accounts. Oftentimes the root cause for not acting is not knowing. And this is a challenge that advicetech platforms are well positioned to help overcome.

A suite of tools, seamlessly integrated into a plan sponsor or retirement plan advisor’s client relationship management (CRM) system, enables advicetech to streamline client profile data extraction. Advisors then receive automated alerts tied to specific client milestones, such as turning 55, along with recommended financial strategies appropriate for that age marker. For instance, upon reaching age 55, an alert may be triggered to notify the client of increased catch-up contribution allowances for their health savings account (HSA). Combined with clear, insightful communications, these platforms amplify the accessibility and understanding of such contributions, encouraging proactive, informed decisions.

Harnessing tech and behavioral insights to empower participants

Merging seamlessly into this is the utilization of behavioral insights, a powerful instrument for translating tailored advice into actionable steps. Through mechanisms like automatic enrollment and smartly crafted communications, participants are nudged past common cognitive hurdles, such as inertia, enhancing engagement and encouraging informed, proactive financial behaviors.

In alignment with this, advicetech platforms have become instrumental in empowering participants, and the caring financial professionals that support them. They cultivate a space where participants can evolve from passive recipients of advice to active architects of their financial futures, enriched with tools, real-time feedback and a user-friendly interface that demystifies the complexities of financial planning.

Enhancing data accessibility for plan sponsors

For financial professionals advising plan participants, high-quality, accessible data is the foundation upon which personalized advice and behavioral strategies are built. Without it, the ability to understand and predict participant needs is significantly hampered. Data analytics serves as the compass that guides advisors in crafting interventions that are both timely and relevant. Improved data access does not just enable better decision-making for today; it provides insights that can shape more effective engagement strategies for the future. For example, platforms can utilize CRM-based alerts to provide advisors and their clients with financial advice targeted to specific ages during a child’s formative years with age-appropriate tools and activities to engage the next generation in meaningful conversations.

Broadening the scope beyond investing

The comprehensive guidance that participants require today transcends narrowly defined investment advice. It’s about creating a balanced financial plan where retirement savings don’t have to compete with other financial priorities but are integrated into a holistic strategy. And beyond asset allocation and security selection, a broader focus also includes the savings and investing rate, and asset allocation considerations, both of which are powerful drivers of success. Advicetech platforms stand out by providing such an integrated approach, offering participants a bird’s-eye view of their financial landscape, and enabling them to make informed decisions that consider all aspects of their financial health.

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For plan sponsors and caring financial professionals, the ultimate goal is to empower participants, guiding them towards a more secure and fulfilling retirement. However, the challenge of engaging participants and aiding them in making informed decisions has persistently loomed. The emergence of advicetech platforms presents a promising solution. These platforms significantly improve the scalability for a retirement plan advisor to efficiently serve all clients, establishing additional touchpoints while empowering them to offer clients advice opportunities that might have otherwise been overlooked. These platforms not only provide personalized, age-based advice but also serve as catalysts for participants’ financial education, emphasizing the long-term value of retirement savings and prudent choices. By incorporating interactive tools and behavioral nudges, they gently steer participants towards improved decision-making, fostering confidence and purpose.

For plan sponsors and financial advisors alike, integrating advicetech into their strategy signifies a commitment to providing ongoing, adaptive support that resonates with participants’ evolving financial circumstances. It fosters a responsive retirement planning environment where participants receive the necessary tools and guidance to make informed decisions throughout their financial journey. This not only enhances the participants’ confidence in their retirement planning, but also creates a more engaging and effective planning process.

Philipp Hecker is CEO of Bento Engine, a fintech platform empowering proactive, comprehensive advice at scale.