More choices, better plan design and better outcomes are among the many reasons why plan sponsors see the value in having an advisor oversee their workplace retirement plan.
In fact, plan sponsors cite peace of mind as a leading benefit when it comes to having plan advisors drive employee engagement and investment guidance—which eases internal concerns, adds value to the participant experience and decreases the pressure of administrative tasks, according to Morgan Stanley at Work’s inaugural workplace retirement study.
Better Participation and Outcomes
Among the study’s key findings are that 87% of plan sponsors reported that offering access to a plan advisor with a workplace retirement plan delivers better retirement plan outcomes. This includes 85% who report that most or all of their eligible employees are on track for retirement. In contrast, plans which do not currently have a financial advisor report a lack of insight into retirement readiness.
What’s more, nearly 45% of plan sponsors with a plan advisor reported that 75%–100% of eligible employees are enrolled in their company’s 401(k), compared with only 33% of plan sponsors without a plan advisor.
Advisors also help with providing plan sponsors with more choice. A large majority of plan sponsors (88%) agree that a plan advisor offers robust plan features with a range of investment options. In addition, plans with an advisor tend to offer added features like automatic match, match options and auto enrollment that help engage participants and increase retirement savings. In fact, 91% of plan sponsors agreed that having a dedicated financial advisor provided them with guidance on critical plan design options as their company grew.
Moreover, nearly all plan sponsor respondents (95%) said the fees associated with a plan advisor is worth the cost given the investment management (28%), fiduciary guidelines (67%) and compliance (75%) considerations.
Priorities and Needs
The top reason plan sponsors cite working with a plan advisor is to provide oversight of investment management, with 28% of the population selecting that choice. The study also found, however, that businesses of different sizes prioritize different needs.
For instance, when asked what the primary reason was for offering access to a dedicated financial advisor with the company’s 401(k) plan, small businesses (fewer than 20 employees) named resources for employees (26%) as the primary reason, while enterprise business (more than 3,000 employees) reported needing investment oversight (37%). Growing mid-sized businesses (20–100 employees) were looking for guidance on plan design (20%).
And while investment management is cited as the No. 1 reason why plan sponsors consider advisory services, they also view relationship building—including accessibility, responsiveness and consistency—as important.
As for when to onboard a plan advisor, 35% of plan sponsors agreed that the best stage of growth to onboard is between the 20-to-100 employee mark. In comparison, 24% said between 101-300 employees, while 27% said between 301-1,000 employees.
“As a fiduciary of their workplace retirement benefits, plan advisors can play a central and critical role in helping employees reach their long-term investment and retirement goals, while helping employers attract and retain top talent,” explains Anthony Bunnell, Head of Retirement for Morgan Stanley at Work. “Financial Advisors are an often-overlooked resource that can enhance and support the work plan sponsors do, while forging long-term, valuable relationships with their most mission-critical talent.”
The study’s findings are based on proprietary, third-party research and survey data conducted by Rebel & Co. of 350 plan sponsors at companies with 20-3,000 employees that offer financial benefits including a 401(k) plan across various industries in the U.S. These companies have either a dedicated financial advisor with their 401(k) plan, have worked with an employer in the last 12 months that offered a 401(k) plan, or are currently involved in selecting or managing the company 401(k) plan. Respondents were interviewed from Feb. 7–28, 2022.
