Data & Research June 5, 2014

Sponsors Want Advisers to Adjust Focus

Plan sponsors want more consultation on outcomes and how to accurately measure and improve participants’ retirement readiness, says new research from the Principal Financial Group.
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An increasing number of plan sponsors are relying on projected income replacement ratios to gauge the success of their plans, according to the Principal Financial Group. Numerous industry experts speaking at the 2014 PLANSPONSOR National Conference, held this week in Chicago, shared a similar assessment, yet sponsors on the whole say they’re not sure their financial professionals are on the same page (see “PSNC 2014: Plan Health and Retirement Readiness”).

Nearly two-thirds (63%) of plan sponsors measure the success of their retirement plans according to participants’ ability to achieve sufficient income throughout retirement. But less than half of those surveyed by the Principal say their financial professional attaches the same importance to that metric.

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“This is a clear opportunity for financial professionals to demonstrate their value,” argues Tim Minard, a senior vice president at the Principal. “By expanding their focus and diving deeper into plan evaluation, financial professionals can build stronger practices and create loyal followings of highly satisfied clients.”

The survey points to a number of important trends in the service expectations of sponsor clients, such as:

  • Plan sponsors believe their financial professionals are more focused on having a high participation rates (64%) and an attractive fund lineup (63%) than plan outcomes;
  • A strong majority of plan sponsors (76%) are open to the idea of employing a consultant or financial professional for help on plan design changes that can improve participant outcomes; and
  • Two-thirds of plan sponsors expect their financial professionals to be aggressive in promoting outcome-focused retirement income planning.

“Financial professionals who focus on fees, funds and fiduciary responsibility may not be focusing enough on participant outcomes,” Minard explains. “The survey shows that plan sponsor clients and prospects want to work with financial professionals who are as concerned as they are about the end game, or how well participants will be prepared to afford a comfortable retirement.”

Brightworks Partners conducted the online survey of 283 retirement plan sponsors between September 12 and 18, 2013. Those surveyed offer either standard or safe harbor 401(k) plans, have more than 50 eligible employees and use a paid financial adviser for various plan-related purposes.

A summary of the research results is available here.

Data & Research June 5, 2014

Employees More Focused on Overall Financial Wellness

Employees are showing more focus on their overall financial wellness, according to a Financial Finesse report.
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Seventy-eight percent of questions received by Financial Finesse’s team of Certified Financial Planner professionals during the first quarter of 2014 were proactive in nature, focusing on what employees could do to improve their financial wellness rather than what they needed to do in response to an immediate financial problem.

According to the company’s Q1 2014 Research report, the increased focus and engagement has contributed to improvements in employees’ financial wellness in several key areas. Since first quarter 2012, retirement preparedness has improved, as more employees report being on track to reach their income replacement goals in retirement (22% vs. 15%), and fewer employees report having taken a retirement plan loan or hardship withdrawal (25% vs. 34%).

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In addition, investment management has improved since 2012, as more employees feel confident in the way their investments are allocated (42% vs. 33%), have a general knowledge of investing (74% vs. 72%), have taken a risk tolerance assessment (48% vs. 43%), and rebalance their investments (37% vs. 31%).

Financial Finesse also finds employees’ cash management has improved. Compared to first quarter 2012, more employees say they have a handle on cash flow (72% vs. 66%), maintain an emergency fund (55% vs. 49%), and pay their bills on time (89% vs. 85%). Debt management has improved, as more employees are comfortable with their debt (60% vs. 57%) and regularly pay off credit card balances in full (57% vs. 52%).

In its 2013 Year in Review report, Financial Finesse noted more employee engagement in employer-sponsored financial wellness programs. The company says this increase in engagement has led to more awareness of financial vulnerabilities, which has contributed to an increase in financial stress. However, rather than debilitating employees, the increased stress appears to be moving them to action (see “Employees Taking More Responsibility for Financial Stress”).

“If these improvements in financial wellness are sustained, we believe the current percentage of employees that report high or overwhelming levels of financial stress or report feeling that their financial situation is out of control will decline,” the company says.

The Q1 2014 Research report is here.

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