The conventional wisdom that employers want a plan that is easy to administer and costs less, may still be true, it’s not nearly as nuanced as the reality of what employers look for in 401k consultants.
While the conventional wisdom that employers want a plan
that is easy to administer and costs less, may still be true, it’s not nearly
as nuanced as the reality of what employers look for in 401k consultants.
Employers and employees’ needs are in alignment most of the time in what they
want from those consultants and advisors, but taking note of what employees
want (and need) may go a long way to ensuring employer satisfaction with their
choice of 401k consultant.
Employers still list the ease of plan administration as a
top concern. But many now want their consultant to have an investment policy
statement that indicates how and why investments are chosen. Even more
important, employers want the consultant to show that the investment policy is
While employers complain about the mountains of paperwork
involved in plan administration, their employees complain about not
understanding the offerings. Employees who feel that they don’t understand a
plan or its benefits may reduce the amount of assets in the plan by not
enrolling at a maximum contribution or not enrolling at all. Additionally, most
employers and employees want to streamline the onboarding process or make auto
enrollment a top priority.
Recently surveyed employers stated that plan cost was a top
priority. They wanted consultants who would help lower the overall costs of the
plan, including help in reducing participant fees. The balancing act between
plan fees and participant fees has been more sharply noted by employees in
surveys, even though there is a greater understanding of how plan and
individual fees are charged.
So what needs are new? Customer service tops the list.
Employers and employees both noted that while they rely
heavily on newsletters from their plan consultants, they don’t necessarily
trust the information in those newsletters. Employers and employees both note
that the best way to build trust is through customer service methods that seem
like no-brainers: Basics like answering the phone and having one-on-one time
with representatives from the consultant’s company go far. This holds true even
if the consultant can’t get to every employee: The talk around the water cooler
by those employees that did meet with a representative from the consultant will
increase the favorable view of the company.
Size of the assets under the plan also impacts what the
employer wants in terms of customer service. Employers with plans with assets
over $25 million want advisors who can help in plan design, fiduciary support,
finding additional benefits and investment selection.
What do the employees want? Employees want guidance from
start to finish. Surveys show that employees want help in enrollment, not only
with the paperwork but also with choosing funds. And, other surveys show that
employees who manage their investments themselves tend to choose overly popular
stocks initially and fail to reassess and reallocate later. In addition, they
fail to diversify properly and lack understanding of investment risk from the get
go. While surveys of recent enrollees also show that employees want to spend
less time managing their portfolios, other surveys show that more than half of
employees enrolled in 401k’s don’t know if they are on track to reach their
retirement goals. The take away: Employees need guidance and education about
their plans, but want to make their own choices.
Delivering that education and guidance also is an area of
mismatch. Employees favor one-on-one education and interaction, whereas
advisors often opt for collective education like webinars and classroom
sessions. The one-on-one interaction needed to build trust also can improve how
employees (and employers) understand the performance of the plan and advisor.
Targeting audiences is also essential. Those in the
“millennial” age group may report higher levels of financial confidence, but
actually lack experience in understanding the depth of involvement in choosing
investment priorities and the length of the timeline involved in generating
financial wealth. Millennials’ belief that they are financially savvy also
leans towards one-on-one education over collective education so that they won’t
tune out information based on their professed investment expertise. Surveys of
millennials who run their own businesses show that more than two-thirds of them
work collaboratively to generate agendas for their meetings with financial
Employers may want one-on-one time to meet with plan advisors to streamline paperwork, onboarding, get advice on design, ensure compliance with investment policy statements and a host of other trust-based needs. Employers also want employees to understand their plan and trust their plan advisors. The center point of both groups’ needs: solid customer service and easier administration.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.get xpress proposal