A new report based on the results of two separate surveys among plan advisors and plan sponsors looks at their perception of the industry as it relates to selling, adopting and maintaining plans.
Vestwell’s 2020 Retirement Trends Report analyzed these two profiles independently and comparatively to see where the groups align, where they differ and how they dictate current retirement trends. Conducted in August 2020, only advisors who sell retirement plans were allowed to respond to the advisor component of the survey, resulting in 434 responses. The sponsor survey included 164 plan sponsors that use Vestwell’s platform.
When sponsors were asked where they believe advisors add the most value, the top two answers—tied at 25%—were recommending/monitoring plan investments and educating sponsors on effectively running a plan.
Vestwell found, on the other hand, that educating sponsors on how to administer a plan was the least common answer, chosen by only 10% of advisors, while advisors’ most commonly see their greatest value as educating the plan participants instead (26%). This was followed by recommending and monitoring plan design (17%).
However, the way so-called “overhaul” advisors (those who believe recordkeeping technology should be overhauled) and status quo advisors perceive value to plan sponsors is significantly different. Overhaul advisors believe educating plan participants is where they add the most value (29% versus 16%) while “status quo” advisors are most likely to say that the biggest value they bring is supporting plan sponsors when they run into an issue (27% versus 13%).
“We found it interesting how the perceptions advisors have of their own roles affect their expectations of recordkeepers,” explains Aaron Schumm, Founder and Chief Executive Officer of Vestwell. “Overhaul advisors want to focus on plan engagement and education, so they take a more proactive approach—they'd like to see the core of recordkeeping fixed to give them the space to help participants. Status quo advisors, on the other hand, take a more reactive approach. They find value in helping sponsors navigate challenges rather than expecting the core of those challenges to be addressed,” he says.
"Additionally, plan sponsors are generally somewhat versed on what can and should be done, with the guidance of advisors and administrator partners," adds Schumm. "Participants, however, create a great opportunity for advisors to step in and build relationships tailored to the individual, catalyzing a life-long engagement, when done right. There is no better place for any advisor to engage in their relationships than working with a plan sponsor and helping their employees along the way. But to do so effectively, and efficiently, requires leading through technology."
As to determining the success of their plan, the surveys found that advisors are more focused on plan participation rates (61% listed it as a top factor versus 39% of plan sponsors), while sponsors were more focused on the administrative side, citing no administration errors 60% of the time and minimal time managing a plan 59% of the time, the study notes.
Recordkeeping and the SMB Space
With respect to recordkeeping, the advisor portion of the survey also assesses their perception of recordkeeping technology and the challenges of selling and servicing in the small and medium-sized business (SMB) retirement space.
The survey found that three out of four advisors believe recordkeeping technology should be overhauled. In light of that finding, the general view held by those who believe the technology needs a refresh versus those who believe it is fine as is, affect additional responses across the survey.
An example of the differing views is seen when comparing what they find to be the most challenging part of working with other recordkeepers. Both groups align on lack of integrations as a challenge, but overhaul advisors are more likely to say high fees (45% versus 28%) and poor user experience (52% versus 33%) are their biggest challenges.
Aside from working with recordkeepers, the firm asked advisors about what they found to be the most challenging part of selling in the SMB retirement space, defined as under $10 million. The number one answer was prospecting (33%) followed by fee compression (26%) and “too much hand holding” (20%).
Advisors also understand that plan sponsors face challenges, too. When asked what the most common pain point their retirement plan clients face, the top issues cited were related to plan administration:
- Payroll data discrepancies (34%)
- Year-end testing (32%)
- Investment allocations (16%)
- Eligibility calculations (11%)
- Other (7%)
To help understand what advisors value most from recordkeepers, Vestwell asked them about the top three most important attributes when considering provider recommendations. Excluding sponsors who choose a plan because their advisor recommended it, the top three reasons were strong customer service (53%), user-friendly experience (52%) and cost effectiveness (38%).
In comparing advisor attitudes, overhaul advisors were much more likely to select user-friendly experience (55% versus 41%) and payroll integration (31% versus 16%) as among their top three features from a provider versus status quo advisors.
Looking Ahead
As for what new services they plan on incorporating into their practices over the next year, the most common answers among advisors were participant financial wellness planning at 44%, followed by Multiple Employer Plans (MEPs)/Pooled Employer Plans (PEPs) at 33%, managed accounts at 27%, and HSAs at 26%.
When asked about what trends they are following, financial wellness also came out on top at 51% followed by Regulation Best Interest and fiduciary rules (46%) and advisor/recordkeeping consolidation (41%).
