More Sponsors Seeking Expert Advisers

After a year of nuanced challenges, plan sponsors say they are looking to DC plan specialists for a broad spectrum of advice, and they want higher levels of expertise.

Voya Investment Management (IM), the asset management business of Voya Financial Inc., has announced the findings of the third edition of its survey of plan sponsors and defined contribution (DC) specialist advisers. The survey was developed to help DC specialists better understand the needs of their clients and prospects, while giving plan sponsors a chance to voice their hopes and concerns.

The survey, conducted in 2021 between mid-February and early March, found sponsors and DC specialists continue to share views on many aspects of retirement plan support and service, but where differences exist, they indicate that DC specialists feel their services add greater value than plan sponsors recognize—pointing to an opportunity for DC specialists to better demonstrate their value.

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“Sponsors told us they are looking to specialists for a broad spectrum of advice and want higher levels of expertise, which again underscores the need for specialists to make sponsors aware of all that they can do,” says Jake Tuzza, Voya IM head of intermediary distribution.

A change noted in this year’s survey results is that sponsors are paying more attention to plan design issues, as guidance on updating plan design and features was the second most frequently cited DC specialist support area being sought. The survey did find upticks in sponsor recognition that DC specialists help keep plan costs reasonable (93%) and that DC specialist compensation is proportional to the support provided (85%). Also encouraging, Voya says sponsors are more likely to say they understand the DC specialist’s compensation and fee disclosures (73%).

“Given the results of this survey, there are things specialists can do that demonstrate their value,” Tuzza says. “For example, articulate your value by drawing up an inventory of the services you provide to each sponsor and assess yourself on how closely your services focus on their priorities. We also recommend embracing ESG [environmental, social and governance] in the investment selection process. We expect to see increased demand for ESG strategies—especially as younger employees come to represent a greater percentage of plan participants.”

The survey also looked at several other issues impacting sponsors and specialists, including the impact of COVID-19, use of target-date funds (TDFs) and the Setting Every Community Up for Retirement Enhancement (SECURE) Act.

Voya says the most common pandemic-related impact on retirement plans was an increase in hardship withdrawals. Only one in five sponsors saw no impacts, and many noted the need for “post-COVID realignment” to drive better participant and plan outcomes. The pandemic amplified trends that already were underway, including increased attention to plan design, review and rebidding of service contracts and an emphasis on the digital experience.

Many industry professionals see TDFs as “foundational” components of a retirement plan and less of a forefront concern. Yet, the study found that mid-sized plans have significantly increased their use of TDFs since 2018, from 56% to 74%, in line with larger plans. Smaller plans now stand alone with lower usage levels at about 53%. In aggregate, nearly six in 10 sponsors include TDFs in their plans, an increase from 2018. Of the aggregate four in 10 sponsors whose plans do not currently offer TDFs, two in five say they would prefer to include them, up from one in three in 2018 and one in four in 2016.

The study also found that most sponsors and DC specialists agree that the SECURE Act has encouraged plans to adopt a focus on retirement income. Offering a retirement income solution can complement financial wellness programs, such as online tools and calculators, education on retirement income planning and education on investing. While the majority of sponsors plan to offer retirement income options, such as guaranteed income for life products, these options are not yet widely offered.