What Participants Want

Despite the prevalence of TV investment shows and personal finance columnists, people want help making sense of the markets and most often want and need a human adviser to tell them what to do, especially when markets are volatile, experts say. There is much discussion by advisers—including in this magazine (see the “Connectivity” sidebar in our cover story)—about offering participant services or wealth services. Results from the 2021 PLANSPONSOR Participant Survey give an indication of the attitudes and behaviors of American workers who participate in an employer-sponsored retirement plan—plans that provide advice preferences and plans that do not.

The survey of participants, last fall, showed, perhaps surprisingly, that family and friends were not the most trusted source of information about achieving retirement goals. Financial advisers, whether affiliated with the employer or not, were the most trusted source for half of all respondents. Employers—and one might consider this category to include retirement plan statements and other information that the employer supplies—were the most trusted source for 15%.

That trust bodes well for advisers and employers who want to help participants get on track. It also implies ample opportunity for advisers, as only half (51%) of participants work with one. Just 30% work with a human adviser, and 12% use robo-advisory services. More than one-quarter (27%) do not currently work with an adviser but note that they plan to.

Diving deeper into the data also gives employers and advisers insight into what they can discuss with participants. Much has been made of the competitive recruiting landscape and the need to retain employees, sometimes leading to conversations about how to compete with benefits.

When asked about trade-offs, Americans—both those employed and unemployed—showed preferences for guarantees and dollars now, instead of benefits later. For instance, 61% would prefer a $10,000 contribution into their 401(k) account instead of guaranteed lifetime payouts of $250 per month ($3,000 a year) beginning at age 65. This might be surprising to advisers who realize the value of that guaranteed lifetime income, and it shows the importance of explaining retirement income and protecting assets.

Another preference was a guaranteed 3% return over a market-based return that might greatly exceed 3% but also could lose money. Lower fees and “below average” returns were preferred to higher fees with the hope of “above average” returns.
For advisers, recognizing the trust employees place in them, along with understanding the responses to the trade-offs, could inspire communications that explain the value of each option.

“Creating interactive content can help engage the participant and explain the more complex solutions or offerings,” says Deepak Agrawal, vice president of digital strategy and wealth management, U.S. Canada and global fintech, at Franklin Templeton in San Mateo, California.That type of content can lead to more engagement and proper decisions by participants, Agrawal notes. “It can be a specific call to action, based on the unique profile of an individual.”