Plan Sponsors Increasingly Offer Financial Adviser Services

More plan sponsors are pointing participants to financial advisers, according to an MFS Investments survey released Monday.

At the moment, 64% of plan sponsors are offering advisory services to participants, and another 17% are considering an option, according to the firm’s survey of 141 plan sponsors.

The financial planning connection is being driven in part by participants, with a separate MFS survey of 4,000 participants showing that 70% say they would use an advisory service if offered, 20% saying they’d possibly use it, and just 10% saying they are not interested. Many of those who are interested also want to speak with an expert directly, according to Savage.

“Plan sponsors are aware of this [demand],” Jeri Savage, retirement lead strategist at MFS. “There is an understanding that especially as people approach retirement, they need more personalized or customized needs and that’s where the role of advice can come into play.”

For large plan sponsors, that often comes via managed account services, with plans of $1 billion or more primarily offering advice via managed accounts at 56%, according to the survey. Mid-sized plans ($100 million to $999 million) and small plans ($99 million to $25 million) provide more general adviser offerings.

A very small percentage of sponsors, Savage notes, provide services at retirement, at around 1% of plan sponsors surveyed.

The retirement strategist head also notes that, with most plan sponsors already offering advice options, the link to participants may be as much about increased or improved communication of those resources as adding options.

Personal Needs

That communication need appears to extend to managed account services. At the moment, managed account advice services tend to be opt-in, with about 14% of plan sponsors offering them as a qualified default investment alternative, according to Savage. That compares to 55% offering the service for participants to use.

“Participants feel like they are unique and need personalized advice,” Save says. “But they also desire to be told what to do and need a little bit of handholding.”

This guidance is especially needed at times of market volatility or managing life changes.

Savage also notes MFS asked plan sponsors about meeting the desire of many participants to embark on phased retirements as opposed to the traditional full retirement the system is generally built around.

About half of employers (49%) either have or are thinking of adding “programs that would allow workers to gradually transition into retirement by reducing hours,” according to MFS. That finding points to the need for more personalized advice and guidance around these more complicated transitions, along with how plan sponsors may guide participant outcomes, Savage explains.

“There are implications here for how we are thinking about retirement income solutions,” she says. “Everything is so anchored to that goal of retiring completely when participants might prefer to do something different …. we need to think about how we can accommodate that, which points toward more advice and guidance.”

Top Focus Areas

Plan sponsors aren’t just relying on advisers to help participants in areas such as market volatility or high inflation, of course. MFS found plan sponsors are more likely to add fixed income and inflation protection options than equity options.

The survey also found that plan sponsors are more likely to replace equity managers than fixed income managers.

When asked what keeps them up at night, plan sponsors checked off the below top five areas in terms of most concern:  

• Changing regulatory and legislative landscape (55%)
• Litigation risk (44%)
• Overall plan administration burdens (43%)
• Figuring out retirement income solutions for the plan (41%)
• Overall participation rates and savings rates (37%)

MFS’s “Building Better Outcomes” survey was conducted from September to November 2023 with 141 plan sponsors of varying asset sizes. Plan sponsors were based in the U.S. and sourced through the DCIIA Plan Sponsor Institute.