Retirement plans are getting more confusing, but that could be a good thing for financial advisors, according to a Fidelity Investments study released Monday.
Fidelity characterized 2023 as a “year of opportunity” for the retirement plan industry in its 14th annual Plan Sponsor Attitudes Study. In other words, the asset manager is putting a positive spin on rising plan complexities that are creating ways to increase advisor impact.
Fidelity’s study found that plan sponsors are relying on advisor guidance more than ever, with only 6% not using an advisor or consultant. As a result, advisors will be able to demonstrate their knowledge base to plan sponsors in the market for their services.
And according to the study, there are indeed opportunities out there for advisors to show their skills. Although 76% of sponsors were extremely satisfied with their current plan advisor, 22% reported they were actively looking to switch, the study said.
The study is based on an online survey conducted in March of 1,351 employers offering retirement plans using a wide variety of record keepers. Fidelity Investments was not identified as the survey sponsor.
“While we see the relationships between plan sponsors and plan advisors evolving, employee communication and education remains at the forefront, with sponsors looking to advisors to offer a more holistic experience,” Liz Pathe, head of defined contribution investment only sales at Fidelity Institutional, said in a statement.
Pathe added that advisors have an opportunity to showcase their impact and service-centered mindset as a result of the evolution that’s occurred in plan designs, investment lineups and benefit offerings.
In terms of complexity, the study revealed that investment menu changes continue to be on the rise. Over the past two years, for example, the report showed an increase in the number of investment options and collective investment trusts.
The study also found that 95% of sponsors are expecting to change their plans later this year, either by increasing the matching contribution (26%), increasing the auto-enrollment deferral rate (26%) or beginning to offer an income replacement fund (26%).
Plan sponsors’ biggest worries, according to the report, include whether the plan is helping to attract and retain top talent (27%), financially preparing employees for retirement effectively (26%), and reducing retirement plan costs for employees (16%).
Finally, the study showed that sponsors continue to face challenges when it comes to employee turnover. On average, plan sponsors reported hiring 37% of their employees in the past two years, with 58% having tenure at or under the five-year mark, the survey said. Meanwhile, 71% of sponsors said this high level of turnover has created 401(k) plan education challenges within the past year.