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Practice Management
A peek inside the minds of plan sponsors
John Doyle
Senior Retirement Strategist

Retirement plan professionals play a key role in helping plan sponsors maintain the health of the plan. In fact, proprietary research conducted by Chatham Partners on behalf of Capital Group found that 96% of plan sponsors say they turn to a third party for guidance.


The left side of this chart states that 96% of plan sponsors rely on financial professionals. The right side shows 50 people icons to represent the total number of plan sponsors in the survey, with 48 shaded blue to represent the 96% that rely on plan sponsors and two shaded gray to represent the rest.

Source: Chatham Partners, "Assessing How Plan Sponsors Manage Change within Defined Contribution Plans," January 2022. Responses to the question, "Does a third-party intermediary such as an advisor or consultant assist you in the management of your defined contribution retirement plan?"*

And plan sponsors are happy with the job their retirement plan professionals are doing. Of sponsors surveyed by Chatham Partners, 74% said they wouldn’t change any aspects of the support they receive. While this may sound like good news, it may also suggest that plan sponsors don’t fully grasp the value or additional services a financial professional (FP) can offer.


This presents an opportunity. In an increasingly crowded marketplace like the retirement plan business, FPs have the ability to differentiate themselves.


Bring more than fund evaluation


Not surprisingly, plan sponsors cited fund evaluation as the most important value-added service provided by FPs. Still, the Chatham research shows there are additional services that are important to plan sponsors.


Top value-added services

The bar chart above shows plans sponsors’ top value-added services by number of mentions in the survey. The chart on the left represents plans with greater than $75 million in assets. Among a base of 24 respondents, Fund evaluation received 15 mentions, Expertise/marketing insight received 8, Compliance received 5, Negotiating cost/fees received 5, High-quality service received 4, and Participant education/advice received 1. The chart on the right represents plans with less than $75 million in assets. Among a base of 23 respondents, Fund evaluation received 9 mentions, Expertise/market insight received 8, Participant education/advice received 7, High-quality service received 5, Compliance received 2, and Negotiating cost/fees received 2.

Source: Chatham Partners, "Assessing How Plan Sponsors Manage Change within Defined Contribution Plans," January 2022. Responses to the question, "Which aspects of the value-added services provided by the advisor for your defined contribution retirement plan are most important to you?" Some categories received more than one mention.*

For example, a plan’s goals and objectives can vary for each plan sponsor, so FPs play an important role in helping them identify and prioritize what they are trying to accomplish — and emphasize — with their plan.


By clearly aligning with your client’s objectives for the plan, you can demonstrate to sponsors how you tie all the services you offer back to their goals. This can help clients better understand the value you provide and ensure you are achieving the best results.


Leverage evolving retirement legislation


Congress currently has several bills in motion, and states across the country have begun considering or already enacted their own state-sponsored retirement program mandates. Employers report a need to stay on top of what’s happening on both the federal and state levels, and to understand how their plans or responsibilities may be affected.


Plan sponsors rely on third parties to provide information on potential legislative and regulatory changes

The charts above show that plan sponsors rely on third parties to provide information on potential legislative and regulatory changes. The chart on the left represents plans with greater than $75 million in assets, with 17 of 26 respondents mentioning that a recordkeeper/advisor/lawyer provides information on legislative and regulatory changes and 10 mentioning they make proactive adjustments/changes. The chart on the right represents plans with less than $75 million in assets, with 16 of 24 respondents mentioning that a recordkeeper/advisor/lawyer provides information on legislative and regulatory changes and 8 mentioning they make proactive adjustments/changes.

Source: Chatham Partners, "Assessing How Plan Sponsors Manage Change within Defined Contribution Plans," January 2022. Responses to the question, "How are potential legislative and regulatory changes factored into your approach for evaluating and implementing changes for your organization's defined contribution retirement plan?"*

One plan sponsor noted that “[Our advisor] was hired to track and stay on top of legislative and regulatory changes that affect our organization’s defined contribution retirement plan to keep the plan in compliance.” The majority of plan sponsors (two-thirds) say they rely on outside providers to bring potential legislative and regulatory changes to their attention, and three-quarters say they delegate such updates to their financial professionals.


Help the plan sponsor define priorities


The study found some of plan sponsors’ top priorities include:
 

  • Increasing employee participation and contribution rates
  • Reviewing investment options
  • Participant support and education

Participant support and education through their FP seems to be particularly important to sponsors of plans with less than $75 million in assets, as it was cited as the most important service their financial professional could provide. Interestingly, participant education was one of the few areas of advisor support where plan sponsors would like to see improvement.


One respondent noted that employee education has mostly been handled by their plan provider, but they would like their financial professional to be more involved and proactively reach out to participants. With this in mind, and if your business model allows, you might want to consider personalizing your participant education outreach efforts, targeted to each client’s participant demographic.


Understand plan needs to help drive better participant outcomes


Competing in today’s retirement plan marketplace poses increasing challenges. But given the increasing importance of participant experiences and outcomes, financial professionals who focus on these areas may help drive plan sponsor satisfaction and loyalty.


By uncovering the needs of plan sponsors and their participants and demonstrating the breadth of services you offer, you may be able to set yourself apart. And you don’t need to be a mind reader to know that.


 



John Doyle is a senior retirement strategist with 37 years of investment industry experience (as of 12/31/2023). He holds an MBA from the F.W. Olin Graduate School of Business at Babson College and a bachelor’s degree in economics from Georgetown University.


*About the survey: Chatham Partners surveyed 50 defined contribution plan sponsors with decision-making authority for plans with at least $15 million in assets.

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