Rallying around retirement income: Advisors are educating plan sponsors

With higher volatility and rate uncertainty in the market, retirement plan advisors are looking to help plan sponsors build more resilient portfolios. That’s why advisors are focused on implementing income strategies, according to BlackRock’s 2024 Read on Retirement: Advisor Outlook of over 450 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.

“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.”

“Only 58% of plan sponsors believe participants are on track with their retirement savings (down from 64% in 2023). Outliving savings is the #1 financial fear in the U.S., especially as people are living longer. We’ve lost the security that a pension once offered many workers.

“Employers are concerned about the financial and emotional burdens on their employees and are rallying around retirement income to help boost employee long-term success. Our survey found that 80% of savers say the worry of outliving their savings is negatively impacting their mental health today. And 93% said knowing they’d have guaranteed income in retirement would help their mental health, which can have important implications for work productivity. As mentioned, almost all (99%) employers feel responsible for helping their employees generate income in retirement.”

Demand for retirement income

Amid persistent concerns around outliving savings, 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.

“It’s become table stakes for advisors to be discussing retirement income – and they’re telling us that’s the case …,” said Schroen. “Across the board, 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%).

“The findings underscore that 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.”

Enhancements to practice management

Retirement plan advisors view meeting participant education needs as areas that are important to their growth. Over half (55%) of retirement plan advisors mention they differentiate their practice from their peers through their expertise in meeting participants’ needs and education, including advice and retirement readiness. There is still opportunity, however, for retirement plan advisors to develop education programs for clients. Despite being an area retirement plan advisors identify as being a differentiating factor, less than half (48%) are currently offering financial wellness plans.

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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.”