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401(k) Plan Sponsors Need Help with Fiduciary Guidance from Financial Advisors

Financial Wellness Benefit401(k) Plan Sponsors need help!  They need Fiduciary Guidance from their financial advisor.  Plan sponsors welcome input and oversight from financial advisors, especially when it comes to investment management and regulatory concerns.

That’s according to a new survey from Morgan Stanley, which looked at sponsors’ sentiment regarding financial advisors and their impact on employee outcomes.  Not only do 401(k) Plan Sponsors need help – peace of mind is a top priority.  Peace of mind for plan sponsors is more important than many would think.  In the survey, 28% responded that oversight on investment management was a primary reason for offering a financial advisor to their 401(k) plan.  Surprisingly, 27% of plan sponsors cited investment management oversight at the No. 1 advantage a financial advisor would bring to their 401(k) plan.  Sponsors also noted critical concerns related to compliance (75%) and fiduciary guidelines (67%) as areas where they welcomed oversight from a financial advisor.  Sponsors also called out guidance on regulatory concerns (21%) and an ability to answer employee questions (17%) as key advantages.

The survey also considered when plan sponsors might onboard a financial advisor – 35% of respondents said that the best stage is when headcount expands to between 20 and 100 employees.  Hesitation in onboarding a financial advisor came from concerns about added fees (56%) and beliefs that an advisor would add no value (28%) or that employees wouldn’t use one (14%).

Having a dedicated financial advisor has other advantages too, the Morgan Stanley survey found.  Again, 401(k) Plan Sponsors need help.  Specifically, sponsors said that having support from a financial advisor delivers better plan outcomes (87%), encourages participation (86%), provides support for employee questions (92%), and is worth the cost (95%).

Employers of different sizes reported different needs from a financial advisor:

  • Small businesses (with less than 20 employees) said an advisor served as a valuable resource for employees (26%).
  • Growing mid-size businesses with 20 to 100 employees were looking for guidance on plan design (20%).
  • Enterprise businesses (with more than 3,000 employees) said they needed investment oversight from a financial advisor (37%).

The survey also found that, among plans with a dedicated financial advisor, 85% or more (depending on company size), offered investment choices to participants, including target date funds, exchange traded funds (ETFs), company stock, etc.  Plans with financial advisors offered enhanced features, such as automatic match, match options, and automatic enrollment.

Additionally, in plans with a dedicated financial advisor, 85% reported that most or all of the eligible employees are on track for retirement.  By contrast, plans without a financial advisor reported a lack of retirement readiness insights, according to the Morgan Stanley survey.  Support from a financial advisor also impacts participation in a positive way:  44% of sponsors who offer one said that 75% to 100% of eligible employees participate in the 401(k) plan.

Steff Chalk

Steff Chalk

Managing Editor at 401kTV
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff also serves as Executive Director of The Plan Sponsor University and is current faculty of The Retirement Adviser University.
Steff Chalk
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