Plan sponsors see barriers to retirement preparedness as key challenges to participants, and see decision-making support as essential to overcoming those barriers.
Advisor and plan sponsor perceptions of participant support are broadly consistent from 2016 to 2018 — still resonant is the key challenge of overcoming barriers to retirement preparedness. Plan sponsors and advisors broadly agree on these challenges to participants, such as not knowing how much money they need at retirement and not contributing enough to their retirement savings (Figure 1). Sponsors also note participants’ lack of investment literacy/knowledge and limited support for generating retirement income. Smaller plans are more likely to say participants are inhibited by not knowing how much they’ll need at retirement, while mid-size plans see participants not investing appropriately or taking loans as the biggest hurdles to preparedness.
Source: Voya Investment Management
These findings underscore a greater need for participant education, which increasingly is seen as a key element of financial wellness programs, often the most important element. Assuming plan sponsors agree on the need for greater participant education, the question becomes how to provide it.
Effectiveness of Advisor Support
As in 2016, advisors consider their support to have a stronger influence on participant behavior than plan sponsors acknowledge. Sponsors and advisors still agree that the most effective methods of participant outreach are one-on-one, in-person meetings and group meetings, followed by digital support. Among the findings with practical implications for advisors was the way sponsors ranked the effectiveness of advisor efforts to support plan participants in 2018 (Figure 2).
Source: Voya Investment Management
In-person meetings are likely to remain impracticable until the COVID-19 pandemic subsides or an effective vaccine is widely distributed, probably in the latter half of 2021. In the meantime, that leaves online tools and websites as the feasible outreach options. Figure 2 suggests that sponsors rank one-on-one remote meetings only slightly higher than the use of a general website. Therefore, advisors reasonably can expect a positive reception if they recommend either option, though the general website may be perceived as the lower cost choice.
Methods to Improve Participant Decision-Making
Having established the need for support and the most likely channels for outreach, it remains to examine which elements of support sponsors see as most effective (Figure 3). Sponsors of larger-sized plans are most likely to strongly agree with these sentiments, especially with the benefits of more robust investment information, better monitoring or participant goals and the helpfulness of digital tools. Sponsors of medium- and smaller-sized plan also strongly agree, but at smaller percentages than sponsors of larger-sized plans.
Source: Voya Investment Management.
The majority of sponsors and advisors agree that offering a tiered investment menu — target-date funds, core funds and a brokerage/mutual fund window— for different types of plan participants can result in better investing. Nearly eight in ten sponsors say that participants are best served by staying in the plan after retirement. About seven in ten strongly agree that plans with too many choices can inhibit effective investment decisions.
Call to Action
As in 2016, sponsors today see a need to help participants overcome barriers to preparing for retirement, but they still rate advisor support as less effective than advisors themselves believe. Until the Covid threat subsides, participants contact will be remote, via email, letter, phone or zoom. Use records of these interactions to build a “casebook” of the ways in which you have helped participants. Present a summary of the casebook at your next meeting with the plan sponsor, or include a summary with your regular reporting. Mention the casebook when you meet to discuss deepening support for participant decision-making.
Let Voya help you
Voya is dedicated to meeting the unique requirements of DC-focused advisors. Our primary goal is to support your needs and those of your clients. We are committed to developing long-term partnerships and enhancing the effectiveness of your business. To learn more, contact your local Voya Investment Management representative or call (800) 334-3444 and ask to speak with a Voya DCIO specialist.
Survey of the Retirement Landscape: Insights from Current Research
Voya Investment Management recently released the second edition of its survey of retirement plan sponsors and plan advisors, to identify and better understand the current service needs of sponsors and help DC-focused advisors better align their offerings and priorities to meet those needs. Though some perceptions have changed since the initial survey in 2016, views on a few key issues have evolved and several new issues have arisen. We present key findings of the study in this series of insights. For all the research results, read Survey of the Retirement Landscape: Challenges and Opportunities for Advisors.
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