A new study from Fidelity finds that the number of plan sponsors who are satisfied with their advisor continues to rise, while also revealing a strong correlation between auto-enrollment and overall plan participation.
According to the sixth annual edition of Fidelity’s “Plan Sponsor Attitudes” study (restricted content), which surveyed 952 sponsors of plans ranging in size from 25 to 10,000 participants, 84% of respondents reported using an advisor or plan consultant. Of that group, 70% reported being satisfied with their advisor.
The study also found a big gap in overall participation rates between plans with auto-enrollment and those without. According to the report, plans with auto-enrollment report an 86% participation rate, compared with 52% for those without the option. In addition, the study found that auto-escalation of contributions doesn’t drive large numbers of participants away: just 7% of participants in those plans opted out within the first year after implementation.
At the same time, the study found some major room for trusted advisors to grow their businesses. Just 62% of plan sponsors said their plan meets the needs of the company, while just 52% said it meets the needs of their employees. In that same vein, 86% of sponsors said they have participants who have delayed retirement due to a lack of savings.
Fidelity also found that while 70% of plan sponsors said their advisor is the primary driver of plan investment changes, just 20% of plan sponsors feel that their advisor is “very good” at proving their value to the plan. Perhaps this is why 17% of plan sponsors reported currently being in the market for a new advisor — a measure that’s up 7 percentage points over the past two years.
Plan sponsors are increasingly looking for specialists who are proactive in making plan design changes and in keeping their clients updated on regulatory changes, according to Jordan Burgess, SVP of Distribution at Fidelity. Burgess added that advisors need to be more diligent about recording all of the work they do for a plan in these areas. “Having the ability to articulate and document the value that they are adding is critical for advisors,” he said. “They need to measure progress on their participants’ savings rate and their enrollment rate, and they should have a measure on whether important retirement outcome goals are being met.”
Additionally, the study found that 92% of plans that are managed by an advisor also have a record keeper that “plays an important role in their plan.” Burgess said that the sponsors who reported the highest levels of satisfaction with their advisors were involved with plans where advisors and record keepers worked closely together.
