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Advisors Don’t Need Newton’s Law to Help Beat Plan Sponsor Inertia

Taking a risk is supposed to be a good thing in business. But many plan sponsors would rather say “if it ain’t broke, don’t fix it,” than make an effort to improve their retirement plan’s design.

Writing in the Spring issue of NAPA Net the Magazine, Judy Ward quotes industry insiders who describe the fear many plan sponsors have of failing; they would rather wait for someone else to increase auto-enrollment features, for example, or to introduce enhanced plan design features. But Ward offers suggestions on how advisors can help sponsors operate from a position of strength, rather than fear, and help take the chances they need to in order to create a better, more responsive, retirement plan for participants.

“The framework in which sponsors think about plan design changes plays a part in their decisions,” Ward writes. She quotes Glenn Dial, the head of retirement strategy at Allianz Global Investors, who says that advisors need to get plan sponsors to think critically about what their plan truly aims to do, and then put it in writing.

“If your goal is to truly be a retirement plan, and for employees to end up replacing a certain percentage of their income, then document that,” Dial says. He adds that advisors must do the same with their own business, and adds that Allianz has changed its focus to one thing: helping people get into a position to enjoy their retirement, making conversations with advisors simpler.

Ward says that many plan sponsors also mistakenly focus on employee enrollment as a barometer of the plan’s success, as opposed to their actual outcomes. She highlights an American Century survey in which 83% of plan sponsors reported measuring participation rates but just 28% formally measure how ready for retirement their employees actually are.

To read the full story, click here and then select “Resisting the Path of Least Resistance” under the Investment Management category tab. Or you can download the entire 76-page Spring issue here