In Practice November 30, 2016

DC Advisers Cite Fewer Go To Providers

Advisers recommend an average of just 2.2 plan providers to prospective clients, a new report suggests. 
Reported by

Defined contribution (DC) specialist financial advisers have trimmed down their set of go-to providers, according to the latest Cogent Reports study from Market Strategies International.

According to the study, “Retirement Plan Advisor Trends,” DC specialists are recommending an average of just 2.2 plan platform providers to prospective clients. In fact, 39% of DC advisers recommend only one plan provider for clients to consider, significantly higher than the 32% reported in 2015.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

This has increased the competitive pressure on DC recordkeepers, the report argues, while putting the onus on advisers to closely monitor these trusted recordkeeping partners.

“With nearly four in 10 DC advisers recommending just one provider, achieving that coveted spot on advisers’ recommended list has never been more daunting [for recordkeepers],” the report explains. “As such, knowing which consideration drivers to leverage and understanding DC advisers’ brand perceptions have never been more vital.”

Sonia Sharigian, senior product manager at Market Strategies and author of the report, further observes that advisers work with an average of just 2.6 plan providers across all of their DC business—with indications that the figure may fall further.

According to the study, among established DC producers managing at least $10 million in DC assets, the top two brand consideration drivers are “easy to do business with” and “value for the money.” Interestingly, these both mirror the top factors reported among DC plan sponsors earlier this year.

“The fact that these consideration drivers are similar across both audiences is a testament to the level of influence retirement plan adviser recommendations have in the DC market,” adds Linda York, senior vice president at Market Strategies. “Notably, only a handful of providers including American Funds, Fidelity, Vanguard and John Hancock are strongly associated with these key attributes. Challenger brands need to find another niche if they hope to break the hold of these dominant market leaders.”

More information on the Cogent Reports series of research from Market Strategies International is available here. 

Data & Research November 30, 2016

Millennials Get Good Start on Retirement Savings With Auto Enrollment

A majority of Millennials entering the workforce are enrolled in their employer’s plan and begin saving earlier in their career due to automatic enrollment, an analysis finds.
Reported by

Ascensus analyzed data from its 40,000 retirement plans and 200,000 health savings accounts (HSAs) and found automatic plan design features are driving higher enrollment rates.

Plans with automatic enrollment features see an average participation rate of 78%—9% higher than participation in plans without automatic enrollment. Plans that combine automatic enrollment and automatic increase have an average participation rate of 81%.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

In addition, as automatic features become more prevalent, a majority of Millennials entering the workforce are enrolled in their employer’s plan and begin saving earlier in their career. If they continue to proactively manage their savings strategy, this generation could be in a much better position to fund a comfortable retirement by the time they reach retirement age than those at retirement age today, Ascensus says.

Ascensus data also shows HSAs are favored among savers at or near retirement. Savers older than 55 account for 34% of the HSA assets on the Ascensus platform, suggesting that more savers are leveraging HSAs as a tool to increase overall retirement savings.                                                                     

Other trends the analysis found include:

  • Online capabilities continue to gain traction and promote smarter saving. Ninety percent of new clients onboarded in 2015 opted to enroll employees online. Additionally, online-based retirement calculators are still being used and promote better savings habits. Twenty-nine percent of participants who used the Ascensus online retirement calculator started saving immediately following its use at a 9% deferral rate.
  • HSAs are becoming increasingly popular among all age groups. The number of overall HSA accounts increased 22% in 2015, with 16.7 million open accounts. Similarly, the number of assets in these accounts also rose steadily to $30.3 billion, a 16.7% increase year over year. Current projections show this growth continuing and the HSA industry reaching $50 billion in assets by 2018.

Additional trends and insights about retirement savings and HSAs, as well as college savings plans, is available on Ascensus’ newly launched website, http://pulse.ascensus.com.

«