Retirement Advice Cuts Across the Political Spectrum

High-performing advisers at the J.P. Morgan DC Summit in New York widely hope the government will make retirement savings mandatory for at least some segments of the working population. 

Retirement plan advisers, like professionals in any other field, cover the political spectrum and often disagree on basic points of public policy—from the impact of the Affordable Care Act to the proper role of Washington in regulating Wall Street risk-taking.

Still, there are other areas where advisers show a real ability to embrace bipartisanship—a fact made clear by flash polling conducted at this year’s J.P. Morgan Asset Management DC Adviser Summit. The annual meeting brings together about 150 of the most experienced defined contribution (DC) plan advisers serving employers all across the United States, and this year PLANADVISER got to sit in.

One area of policy agreement among many advisers as made clear by the question: “Should the United States government require mandatory auto-enrollment and/or auto-escalation into defined contribution retirement plans in the workplace?” A clear majority (59%) said yes, although a sizable minority (38%) said no, and 4% were unsure. 

Responding to this result, John Galateria, head of the North America institutional business for J.P. Morgan Asset Management, asked advisers about what type of plans they feel individuals should be automatically enrolled in—and again clear divisions emerged. Some advisers warned that plans run by the government will likely not be aggressive enough to actually help people reach retirement security, for example by only requiring a 2% or 3% salary deferral not tied to auto-escalation—while others argued many individuals would in fact be helped by mandatory-but-modest government-run plans because they can’t afford to spare much in the first place and a little savings is better than none.

Another group of advisers clearly feels the government should back off entirely from legislating the way people save and invest for retirement and focus instead on promoting stability in the wider economy, with the idea being that a rising tide lifts all boats. No surprise, all advisers generally agreed that privately run, employer-sponsored DC plans backed by expert advisory resources are the best option for actually promoting retirement readiness for individual workers. However, advisers cited the ongoing unwillingness/inability of many employers to shoulder the costs and liability involved with first starting and then maintaining a DC plan.

NEXT: Other areas of adviser agreement 

Another striking piece of flash poling data to come out of the J.P. Morgan DC Summit came out of the question: “Do you believe plan participants can make good investment decisions on their own?”

A whopping 57% of advisers said they are “not confident at all,” and 38% said they are “not very confident.” The remainder were a little confident—with not a single adviser in attendance suggesting they are “confident” or “very confident” about this.

“When we asked this same question of plan sponsors earlier in the year, we had 48%  of them expressing at least a little confidence in the investing abilities of their plan participants,” Galateria observed. “We believe that is actually much too high. There are some DC plan populations out there that are more knowledgeable than others, but given what advisers are saying here today, we need to make sure plan sponsors understand the limits of what their participants can handle.”

Advisers across the board clearly felt auto-features are the proper response to these considerations, with most of those in attendance saying they embrace autos and have enacted at least one re-enrollment in recent years. Reflecting the forward-thinking character of the advisers at the summit, 65% said they have recently conducted a re-enrollment, despite the fact that industry-wide only 7% of plan sponsors have conducted a re-enrollment.

“It goes to show you that DC plan advisers are truly leading the retirement conversation in America today,” Galateria concluded. “We know that we cannot leave a solution to the retirement crisis either up to the government or up to individuals to solve. Our industry is going to have a major role to play.”