Participants tend to greatly value their workplace-sponsored retirement plan, and plan sponsors, too, are very satisfied with their 401(k) plans, he says. Employers who sponsor a qualified retirement plan in the small-plan market—particularly those who work with an adviser—expressed widespread satisfaction with the offering, according to a survey by the Guardian Insurance and Annuity Company.
Virtually all plan sponsors (98%) surveyed for a recent Guardian report, “The Small Plan 401(k) RetireWell Study: What’s Working and Not Working for Small Businesses,” are either “very” or “somewhat” satisfied with their 401(k) plan. Advisers are considered an important component in the successful selection, implementation and management of group retirement plans, the survey also found.
More than half of plan sponsors (61%) who work with a financial professional are “very satisfied” with their 401(k) plan overall, compared with only 40% of sponsors who are “very satisfied” with their plans and do not use a financial professional.
This quantifies an industry trend anecdotally apparent for some time, that there is a wide gap in plan satisfaction between sponsors who work with financial professionals and those who go it alone.
The concept of ERISA expertise is often a big hurdle confronting advisers, according to Dubitsky, who says advisers often shy away from taking on institutional retirement plans because they feel they are not expert in the Employee Retirement Income Security Act (ERISA).
More important than expertise in a specific area is partnering with the right professionals, Dubitsky counters. An adviser can work with another provider who has the needed background, products, tools and services to create a full offering.
The regulations of ERISA can also make plan sponsors tense, and even prevent them from offering a retirement plan. “People throw around the word ERISA, and the complexity is daunting for a small-business owner,” Dubitsky tells PLANADVISER.
A well-educated adviser can simplify everything going on in the plan. “This is an important part of the business owner’s overall offering to employees,” Dubitsky says. “People think the war for talent applies only to large companies like Citigroup, but it’s true across the business spectrum—maybe even more so in the small-business market.”
According to the study, nine plan sponsors in 10 think of their 401(k) plan as a useful recruiting and retention tool. “If a retirement plan is considered essential, then why wouldn’t you want to offer it?” Dubitsky says.
Some common issues raised by plan sponsors as potential disadvantages to offering a plan include out-of-pocket expenses (43%), potential fiduciary risks associated with offering investments and advice to participants (44%), the complexity of workplace retirement plans (41%) and the need to educate employees about managing investments (36%).
These issues are precisely where the adviser comes in, Dubitsky says. The adviser can simplify a complex process and a complex product. “We saw in so many cases that the areas that keep people from offering a retirement plan are the areas an adviser can add value,” he says.
Dubitsky points out that most plans are small plans, and many of them are in motion for a variety of reasons. According to Retirement Research Inc., plans with assets ranging from under $1 million to the $5 million to $10 million range have turnover rates between 7% and 9%, further straining sponsors at small plans.
A new plan sponsor might need more clarification, he says. Perhaps there is some dissatisfaction surrounding fees, or the company might be using too complex a plan. It’s possible a small business never worked with an adviser and needs someone to work with, and this can be an opportunity to educate the plan sponsor on issues such as managed accounts or fiduciary services.
The adviser who wants to get started in the small-plan market should keep three things in mind, Dubitsky says. First, a small-business owner usually has no benefits group or HR department. The financial adviser’s job is to alleviate worry and stress by offering myriad services and providing expertise in these areas.
Next, the adviser does not need to be an ERISA expert, but must align with those who are. Educate yourself using the resources offered by partner providers.
Last, bear in mind that the small-plan market has a lot of opportunity, and that capturing a small plan is worthwhile. “Don’t think of it as a lot of work for one small plan,” Dubitsky says. “Get familiar with the products and processes. If you only do something once or twice a year you’re always going to be anxious about it.”
Dubitsky says a surprise of the survey was how much people in the business take for granted, and how much confusion exists that can be alleviated by professional advisers and providers. “It shows what we’re doing is right,” he says.
The amount of satisfaction was gratifying. “401(k) plans sometimes get a bad rep in the media,” Dubitsky says. “We’re seeing that people are overwhelmingly satisfied with their plans. Once you move past all the noise in the media and competing political entities, the employer-sponsored retirement plan has been the most effective and efficient way for people to save for retirement, and people like it.”
The online survey was conducted by Brightwork Partners between November 12 and December 14, 2013, and is based on interviews with 451 senior executives from for-profit organizations with 25 to 249 employees that have been in business three years or more and who are involved in the selection and evaluation of providers of employee benefits such as health and retirement plans.