Retirement plan advisors can use holistic solutions to grow their business

By Susan Rupe

Retirement plan advisors have an opportunity to elevate their offerings beyond “funds, fees and fiduciary.”

That was the word from Vestwell’s leadership, who discussed why integrating a suite of holistic financial wellness solutions will help advisors expand their practice. Vestwell is a provider of 401(k) plans for businesses.

The demand for workplace benefits is shifting beyond retirement plans, said Josh Forstater, Vestwell national sales manager. “We’ve seen holistic benefits increasing in popularity, not only for large market employers but for small and midmarket too,” he said.

Several factors are fueling the demand for workplace financial solutions beyond offering employees a 401(k) plan, he said.

Savers are increasingly seeking more personalized financial wellness solutions.
Workplace retirement plans have moved from perk to prerequisite.
Saver demand continues to grow for more comprehensive and inclusive workplace financial wellness benefits.
Employer-sponsored education savings benefits – such as 529 plans and student loan assistance – are gaining momentum in the response to student debt challenges.

The retirement plan market is exploding, Forstater said. In 2014, there were 362,000 retirement plans in the market. Today, there are more than 700,000. In addition, 48 states either have a mandate in place or are in talks to pass a mandate for retirement savings plans to be offered in the workplace. SECURE 2.0 requires 401(k) and 403(b) plans to provide for an automatic enrollment or an automatic increase arrangement. SECURE Act significantly expanded the tax credits available to companies that offer retirement savings plans.

“What it means is that businesses that never had retirement benefits now all of a sudden do,” he said. “It also opens the opportunity for more holistic approaches. There are new auxiliary offerings and products that you or an advisor can help with, whether that’s a health savings account, student loan solutions or other things that weren’t possible before.”

Vestwell’s 2024 Savings Trend Report showed that savers increasingly want to think more holistically, Forstater said.

“They don’t just ask, ‘What am I getting in retirement?’ They’re asking, 'How will you help me save for all my goals? And how will my advisor on the plan do that?'”

The increased demand for financial advice from workplace retirement plan participants is an opportunity for advisors to provide more holistic solutions, he said.

Vestwell’s leaders described several holistic solutions advisors can offer to retirement plan participants.

Health savings accounts

HSAs are one of the biggest areas for growth in a retirement plan advisor’s practice, Forstater said.

“The HSA is a great way to save for unknown health care expenses,” he said. “We’re seeing advisors fold this into their practice. We see some advisors setting up human resource consulting practices on the side.”

Forstater said HR’s biggest expense is employee health and wellness. “Being able to align to your key constituency as you provide retirement advice is an area we see growing.”

529 college savings plans

Advisors can have a huge impact on families if they understand some basics about college financial aid, and many workers are interested in incorporating a 529 college savings plan into their savings and investment plan. That was the word from Michael Parker, Vestwell senior vice president of program management.

What should advisors tell clients about 529s? One reason people invest in 529s, Parker said, is for its tax benefit. “The flexibility of the plan is another reason - the fact that the parent or grandparent owns the plan, you can transfer the plan to other family members if the child doesn’t go to college – all those make 529s attractive to workers.”

For a child who doesn’t attend a four-year college, a 529 plan can help pay for an apprenticeship program or a two-year or one-year academic program, he said. Any money left over in a 529 plan can be rolled over into a Roth IRA for the child’s future retirement.

“This allows families to do more long-term planning,” he said.

Student loan assistance

Employers can help their workers pay down their student loans and there are tax benefits for doing so, said George Lambert, Vestwell vice president of workplace wellness. The tax benefits were included in the CARES Act that Congress passed in response to the COVID-19 pandemic.

In addition, SECURE 2.0 permits employers to make a 401(k) match for an employee who is paying into the plan but who also is paying down their student loans. This allows the employee to focus on paying down their loans and the employer can get them to participate in the plan.

“If you’re helping an employer with that type of match, the SECURE 2.0 qualified student loan payment match will increase overall participation and contributions into the plan and raise overall plan assets, which is beneficial if you are an advisor,” Lambert said.

“Instead of having the typical conversations around retirement, you can go to your client with a new topic that’s framed around financial wellness.”

Emergency savings plans benefit a retirement plan

Offering employers the ability to provide an emergency savings plan is another way to provide a financial wellness benefit to workers, Lambert said.

“If employees have savings, they are less likely to take emergency loans from their retirement plans,” he said.

ABLE accounts

An estimated 8 million Americans are eligible for an ABLE account, which is a 529-like plan that enables people with disabilities to save for their needs without losing their eligibility for federal benefits.

“It’s a game changer in that people experience disabilities when they’re working but because they need that benefit, they’re disadvantaged in savings,” said Parker, adding that family members can contribute money to an ABLE account on behalf of a child or grandchild with disabilities.

The impact on retirement plan advisors

Offering holistic benefits is a great opportunity for you and your business,” Forstater said. “It means more funds on your investment statement. It means retaining assets through lifetime income. It means bringing in assets through emergency savings, or helping protect assets through things like the SECURE 2.0 student loan match, which enables people to save who probably couldn’t. And there’s nothing that makes HR happier than if you’re the advisor who helped create better outcomes for your clients.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on X @INNsusan.