Demand for 401(k) income solutions is growing: BlackRock advisor survey

If advisors aren't speaking to defined contribution clients about retirement income solutions, someone else will be soon, recommends BlackRock’s Carrie Schroen.

Amid volatility and uncertainty, retirement plan advisors are looking to help plan sponsors build more resilient portfolios. According to BlackRock’s 2024 Read on Retirement: Advisor Outlook, advisors are focused on implementing active and income strategies, and streamlining their practice management, including incorporating AI-powered tools.

“In these uncertain market conditions, retirement plan advisors are looking for solutions that will help more Americans achieve better retirement outcomes,” said Carrie Schroen, Head of BlackRock’s U.S. Defined Contribution Intermediary Business. “Our research demonstrates the importance of access to affordable solutions and education, areas that are vital to providers and participants alike.”

The BlackRock survey provides insights from a study of over 450 large defined contribution plan sponsors, 300 retirement plan advisors, 1,300 workplace retirement plan savers, 1,300 independent savers and 300 retired workplace savers in the U.S.

Demand for retirement income

Retirement income solutions are a focus area for retirement plan advisors: 81% of retirement plan advisors report discussing retirement income with DC clients. Interest in retirement income continues to grow as 82% of retirement plan advisors currently recommend a retirement income solution or are likely to recommend one in the next 12 months.

The BlackRock survey found that “82% of retirement plan advisors are either currently recommending an income product or plan to in the next 12 months …,” said Schroen. “The appetite and demand for retirement income solutions has never been higher – 99% of savers say it would be financially helpful to receive guaranteed income in retirement.

“Employers are right behind them: 99% of plan sponsors feel responsible for helping their employees generate income in retirement (and 72% agree that this has become even more important in the current economic climate.) It’s why we launched our retirement income solution, LifePath Paycheck, earlier this year. If advisors aren’t speaking to clients about retirement income solutions, someone else will be soon.”

Advisors are looking to implement these solutions as employers are increasingly concerned about their employees’ long-term retirement preparedness. BlackRock’s survey found that only 58% of plan sponsors believe participants are on track with their retirement savings, vs. 64% in 2023. Despite the importance of retirement income, retirement plan advisors report their top barriers to greater adoption are communicating a clear benefit in terms of improved outcomes (44%) and providing clear participant education and communications (42%).

“It is not enough to offer retirement income solutions, participants also demand greater education to help sift through the complexity,” said Rob Crothers, BlackRock’s Head of U.S. Retirement. “This is why BlackRock has paired a digital experience, MyLifePath with LifePath Paycheck, our investment solution providing access to guaranteed income through a target date fund. MyLifePath is designed to help educate participants on how today’s contributions can translate into income in retirement.”

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“Providing participant education is an important differentiator, with 60% of advisors saying plan sponsors lean on them for communicating and educating participants on the benefits of improved outcomes from retirement income,” said Schroen. “55% of Retirement Plan Advisors mentioned they differentiate their practice through expertise in meeting participant needs and education (including advice and retirement readiness. And almost half (48%) currently offer financial wellness plans for their clients. To address these needs, we launched a revamped practice management suite earlier this year and continue to build resources to support our plan and wealth advisors in serving their clients.”

The data also shows a spike in interest around adopting AI to streamline practice management. Retirement plan advisors see client servicing and business development as use cases for AI in their practice. While only 9% of retirement plan advisors are currently using AI-powered tools, 53% report being likely to use them in the next 12 months.