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Plan Sponsors Expecting More from Advisors

Industry Trends and Research

The results from the 12th edition of Fidelity Investments’ Plan Sponsor Attitudes Study reveal that in the midst of the COVID-19 pandemic, there was a heightened demand for advisor guidance and expertise, as workplace retirement plan sponsors became increasingly focused on supporting their employees. 

Fidelity’s study finds that plan sponsors continue to focus on improving participant outcomes with 88% making changes to their investment menus and 82% making changes to their plan designs in the past two years. The study, which began in 2008 and surveyed employers that offer retirement plans using a wide variety of recordkeepers, found an increase in plan sponsors’ desire for their advisors to directly engage more with their employees.

“The past year has affirmed for plan sponsors that their commitment to helping employees prepare for the unexpected in retirement has never been more important and reinforced their desire for strong employee outcomes,” says Liz Pathe, head of DCIO sales at Fidelity Institutional. “Plan sponsors are seeking expertise from their plan advisors not only to help guide and inform their investment menu and plan design, but also to help employees strengthen their financial well-being.”

Value Perception

Although advisor satisfaction (73%) and value (69%) remained high in 2020, Fidelity notes that advisor value perception was down 10% year-over-year among smaller plans. The top three drivers of advisor value from plan sponsors included:

  • helps improve employee outcomes;
  • helps improve employee satisfaction; and
  • provides financial advice and guidance to participants.  

The number of plan sponsors that reported they are looking to change advisors more than doubled in the past year—from 16% in 2020 to 34% in 2021. In fact, the top reason for wanting to change plan advisors was a desire for better employee communication and education, followed by lower stated fees, more retirement expertise and a better investment lineup.

The scope of guidance and expertise that plan sponsors expect from their advisors continues to expand. Sponsors also were looking for their advisor to have more expertise in:

  • helping minimize costs (46%);
  • selecting and monitoring investment options for the plan (44%); and
  • keeping them informed on regulatory changes and how to implement them (42%).

“Plan advisors should take an active role in engaging both plan sponsors and their employees to emphasize the value of their plan and educate them to help improve outcomes,” Pathe emphasizes. “Otherwise, they might risk losing clients to an advisor who provides better education and guidance.”

Retirement Readiness

More than two-thirds (68%) of plan sponsors feel employees are saving enough for retirement, up from 59% in 2020. However, 86% of plan sponsors believe at least some of their employees are delaying retirement due to a savings shortfall, and 6 in 10 (60%) believe the pandemic had an impact on their employees’ decision to retire.

Importantly, plan sponsors continued to support their employees and contribute to their retirement savings amid the challenges of the pandemic. Fidelity notes that only 16% of sponsors report that they reduced the employer matching contribution over the past two years. Plan sponsors’ goals for their plans are largely employee-focused, and nearly three-quarters (72%) believe their plan is meeting its goals this year, up from two-thirds in 2020.

Holistic Wellness

Plan sponsors and plan advisors continue to look at programs beyond the retirement plan, recognizing the importance of these benefits for employees. In fact, advisors who discuss topics such as financial wellness and HSAs with plan sponsors appear to earn higher satisfaction scores.

The study found that 76% of plan sponsors who have discussed financial wellness programs with their advisors reported being very satisfied with their advisors, versus 65% who have not had those discussions. In addition, nearly 8 in 10 (78%) plan sponsors stated they were very satisfied with their advisors who raised the topic of HSAs versus 62% who have not had HSA discussions.

Additional findings show that 71% of plan sponsors reported that their advisor had spoken to them about a financial wellness program, and 62% have implemented one in the past two years. Nearly three-quarters (73%) of plan sponsors reported a strong impact from these programs for employees, up from 61% last year.

The findings in the study are based on an online survey of 1,169 plan sponsors conducted in March 2021. Fidelity Investments was not identified as the survey sponsor. Respondents were identified as the primary person responsible for managing their organization’s 401(k) plan, and all plan sponsors confirmed their plans had at least 25 participants and at least $3 million in plan assets.