Sponsors Want Advisers to Adjust Focus

An increasing number of plan sponsors are relying on projected income replacement ratios to gauge the success of their plans, according to the Principal Financial Group. Numerous industry experts speaking at the 2014 PLANSPONSOR National Conference, held this week in Chicago, shared a similar assessment, yet sponsors on the whole say they’re not sure their financial professionals are on the same page (see “PSNC 2014: Plan Health and Retirement Readiness”).

Nearly two-thirds (63%) of plan sponsors measure the success of their retirement plans according to participants’ ability to achieve sufficient income throughout retirement. But less than half of those surveyed by the Principal say their financial professional attaches the same importance to that metric.

“This is a clear opportunity for financial professionals to demonstrate their value,” argues Tim Minard, a senior vice president at the Principal. “By expanding their focus and diving deeper into plan evaluation, financial professionals can build stronger practices and create loyal followings of highly satisfied clients.”

The survey points to a number of important trends in the service expectations of sponsor clients, such as:

• Plan sponsors believe their financial professionals are more focused on having a high participation rates (64%) and an attractive fund lineup (63%) than plan outcomes;

• A strong majority of plan sponsors (76%) are open to the idea of employing a consultant or financial professional for help on plan design changes that can improve participant outcomes; and

• Two-thirds of plan sponsors expect their financial professionals to be aggressive in promoting outcome-focused retirement income planning.

“Financial professionals who focus on fees, funds and fiduciary responsibility may not be focusing enough on participant outcomes,” Minard explains. “The survey shows that plan sponsor clients and prospects want to work with financial professionals who are as concerned as they are about the end game, or how well participants will be prepared to afford a comfortable retirement.”

Brightworks Partners conducted the online survey of 283 retirement plan sponsors between September 12 and 18, 2013. Those surveyed offer either standard or safe harbor 401(k) plans, have more than 50 eligible employees and use a paid financial adviser for various plan-related purposes.

A summary of the research results is available here.