Employers’ Shift To Plan Outcomes Opens Opportunity For Advisors

By Cyril Tuohy

InsuranceNewsNet

Retirement plan sponsors are thinking more about securing retirement outcomes for employees. This may require a shift in thinking for retirement plan advisors, according to a recent survey conducted by Fidelity Investments.

Fiduciary responsibilities are still important to sponsors, but the number of sponsors concerned about retirement outcomes has jumped, according to Fidelity's Fifth Annual Plan Sponsor Attitudes.  

“We’re seeing that the conversation between plan sponsors and advisors is starting to change,” Jordan Burgess, senior vice president and head of defined contribution investment only sales at Fidelity Financial Advisor Solutions, said in a news release.

The changes, Burgess said, may require advisors to “shift their mindset.”

Fidelity said financial advisors could do three things to improve satisfaction among retirement plan sponsors:

• Measure progress toward retirement goals
• Adopt a holistic approach to retirement investing
• Communicate regularly about progress of plan performance

With regard to measuring progress toward retirement goals, nearly 70 percent of plan sponsors said they were thinking about retirement plan design changes, almost twice as many as in 2012, the survey of 897 plan sponsors revealed.

Advisors play a key role in helping sponsors set outcome goals through the use of automatic enrollment and automatic escalation of the deferral — for example, when employees get a raise. Such features have become more popular since the passage of the 2006 Pension Protection Act.

With regard to a holistic investment approach, 67 percent of sponsors have made investment menu changes over the past two years. This is nearly double the 35 percent of sponsors who in 2012 said they made changes to their investment menus, the survey found.

Meeting with sponsors regularly to discuss qualified default investment alternatives (QDIA) and determining the number of options for a sponsor’s employee population remains a key element in an advisor’s role.

On the third item — communicating about the plan progress — advisors can do a better job helping themselves.

The survey found that fewer than 20 percent of plan sponsors said their advisor was consistently communicating the work being performed for the plan sponsor.

Fidelity said those activities shouldn’t be overlooked as 100 percent of sponsors said they were highly or very satisfied with their advisors if they had better plan metrics. Financial advisors say they have noticed a “return to basics,” in that sponsors want more one-on-one attention from advisors.

A phone call from an advisor to a plan participant or employee reminding them of the retirement plan features is helpful, said retirement plan advisor David Hinderstein, president of Strategic Retirement Group in White Plains, N.Y.

Just because plan sponsors and their advisors are familiar with all the benefits and features of a plan doesn’t mean employees are also familiar with the plan’s features, and reminding employees of the benefits can’t hurt, he said.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].