Betterment: Retirement Plan Advice Delivery, Room for Improvement

betterment retirement plan

Betterment: Retirement Plan Advice Delivery, Room for Improvement. Retirement plan participants want financial advice, but they may not be getting it at all, or they’re receiving it in ways that aren’t optimal to meet their needs.

That’s according to the results of a new consumer retirement survey and infographic from Betterment for Business. The survey included 1,051 consumers employed at small and medium-sized businesses who currently contribute to their workplace 401(k) plan.

Fifty-three percent of respondents reported getting no advice on their retirement investments at all. Interesting, given the rise in access to digital tools in retirement plans and online advice-based asset allocation modeling via professionally managed accounts. Typically, managed account uptake has been most prevalent in large plans, but usage is moving down market as medium-sized and smaller plan sponsors look for innovative and holistic investment solutions designed to meet the unique needs of diverse plan populations from early career savers to pre-retirees and retirees.

Nonetheless, the findings from the Betterment survey indicate an appetite for on-demand advice, with 28% of respondents reporting they would like advice whenever they have questions. Additionally, the respondents said they preferred to receive advice via email or 1:1 sessions, rather than through mail or in annual employer-sponsored information sessions. Moreover, Millennials seemed most interested in receiving frequent advice, indicating they’d like it more than once a month.

The implications of these findings may be telling for plan sponsors, especially when it comes to how advice is being delivered. It may time to reconsider current plan education and communication strategies and ensure employees are receiving retirement plan advice according to their preferences.

For example, it may be helpful to create monthly (or more frequent) email campaigns that provide guidance on different elements of retirement planning, from determining the amount of income participants will need in retirement to how to allocate their investments appropriately for their age and retirement goals.

If your plan has a financial advisor, encourage participants to set up 1:1 sessions to discuss their goals and help get their retirement plans on track. Sponsors might even offer scheduled individual “meet and greet” sessions that employees can sign up for to get acquainted with the plan advisor and keep them accountable to their goals. If monthly meetings seem onerous, even quarterly sessions can help keep participants focused on saving and make smarter choices when it comes to planning for their future financial needs.

The good news is, workers who have financial advisors still seem to trust them, despite the building awareness around issues raised by the Department of Labor fiduciary rule, which says advisors must act in their clients’ best interests. As such, many respondents to the Betterment survey said they are sticking with their current advisor, and 79% reported they “fully trust” or “place a lot of trust” in their advisor.

Betterment also found that while fiduciary awareness is catching on, it’s still a confusing topic for many employees. Less than half of respondents (42 percent) correctly identified the definition of a fiduciary; 20 percent of respondents believed that the terms “fiduciary” and “financial advisor” are synonymous, and 27 percent did not know what one was at all.

Among those who indicated awareness of the DOL fiduciary rule, 84% have taken no action (i.e., asking their advisor if they are a fiduciary) based on their understanding of the ruling. However, 48% of those who did take action have found a new financial advisor.

Consistent with previous research findings, the Better survey also found that behavioral “nudges” such as automatic enrollment and automatic contribution escalation help engage participants with the plan and foster increased retirement readiness. A full 94% of respondents in a 401(k) with auto enrollment currently contribute. Among those that remained enrolled, half increased their contribution rate. Additionally, 78% of respondents in a plan with automatic escalation take advantage of it.

We wrote about the benefits of “nudging” participants to help improve savings behaviors here.

Overall, the Betterment study indicates that plan features like auto enrollment and auto escalation are having a positive impact on workers’ retirement readiness, but there is still room for improvement when it comes to delivering retirement plan advice in ways that participants want to receive it.


Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek

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