Retirement: Helping Workers Save More – It’s a Matter of Trust. Most American workers don’t trust their retirement plan provider. In light of that, providers and plan sponsors alike have their work cut out for them when it comes to cultivating that trust.
In fact, just 30% of Americans trust their retirement plan provider — the highest in the last five years, according to a recent survey of more than 4,500 participants from the National Association of Retirement Plan Participants (NARPP) on trust and engagement (cited by MarketWatch). That figure was 26% in 2014. Of those surveyed, 13% said they trust financial institutions overall, and 23% said they have confidence in these institutions.
The majority of participants distrust their retirement plan provider because they feel they don’t understand the fees they’re paying for their retirement accounts, and they also don’t believe they’re being told the whole story about those fees. Citing TD Ameritrade research, the MarketWatch article points out that just 27% of Americans report knowing what they’re paying in 401(k) fees. The issue, of course, is that high, and often unnecessary, fees can erode investment returns, in turn leaving investors with an income shortfall in retirement. According to Brightscope, again cited by MarketWatch, large plan fees are, on average, below 1%. Small plan fees can range between 1.5% and 2%, with still others running 3.5% or more on the high end. In short, fee “standards” are still very much all over the board, especially in the smaller plan market, where budgetary and resource constraints create even more of a concern about fees and who’s responsible for paying them.
The problem with all of this distrust is that, ultimately, it hinders Americans’ ability to save and invest with confidence. This sense of discomfort with financial institutions may cause workers to either make poor financial decisions or worse, do nothing at all, even though they know they should be saving for their future.
According to the NARPP, the factors that would increase workers’ trust in retirement plan providers are: education, more transparent fee information, shared relevant information about the plan or retirement savings, and feeling as if the provider is acting in participants’ best interest.
Increasing numbers of Americans are looking to their employers, and by extension, retirement plan providers, to help them project and create their retirement income. Seeking opportunities for your retirement plan provider to help address participants’ retirement income needs may be one way to help build your employees’ trust in them. Another is to communicate with participants early and often about the fees they’re paying, what those fees mean, why they’re being assessed, and their potential impact on savings. Finally, it can help to have representatives from your plan provider come on-site when possible and meet with participants, either one-on-one, or in a group setting, so they can interact directly with the people who are managing their savings and better understand how these professionals are working for their best interests, not against them. And it goes without saying, if you believe, for any reason, that your current provider is not worthy of your, or your participants’ trust, it’s likely time to begin the search for a new one.
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