PLANSPONSOR - October/November 2018 - 8

Participants Speak
to the Power of Advice
A
mong the many challenges of sponsoring
a defined contribution retirement
savings plan, keeping up with the
concerns and expectations of plan participants
ranks high on the list. For nearly a
decade, Schwab Retirement Plan Services,
Inc., has kept its finger on the pulse of participant
thinking
through its annual 401(k)
Participant Survey. In the just-released 2018
edition of the survey, Schwab looked closely
at how participants use and value retirement
planning advice. PLANSPONSOR spoke with
Nathan Voris, managing director of business
strategy at Schwab Retirement Plan Services,
to find out what the firm learned-and what
it all means for plan sponsors.
PLANSPONSOR: The retirement industry
has expended tremendous energy developing
advice platforms for retirement plan
participants, and clearly believes in the
value of advice. What about participants?
VORIS: Many tell us they want help. In
our latest survey, more than 50 percent of
participants said their financial situation
warrants advice, and 52 percent said they
would expect it to drive better investment
performance.1
That's encouraging, but we're
still concerned about the 47 percent who
believe their situation does not warrant
advice1
-even when they have access to a
broad array of no-cost or low-cost planning
solutions designed to accommodate virtually
any situation. The challenge for service
providers and plan sponsors is to get that 47
percent to believe their situation is important
enough to take advantage of advice.1
PS: What would you tell participants about
why they should do that?
VORIS: We know advice works. We have
documented that when participants use
third-party advice services, their savings
rates go up, portfolio optimization improves,
retirement readiness scores go up, and they
become more confident about their retirement
outlook.2
PS: What kind of help are participants
most interested in receiving?
VORIS: Much of it leans toward financial
planning: calculating how much they'll need
to retire, figuring out when they can retire,
getting investment advice on their 401(k)
portfolios. Some of the newer issues they're
interested in as financial wellness programs
take root revolve around more basic things
like creating a budget, establishing an emergency
savings account, or figuring out what
to do with their student loan debt.
PS: Do participants have a clear preference
on how they want to receive advice?
VORIS: It's pretty evenly split between
online and in-person help, which is why our
approach is to plan for everything. You need
great solutions that are fully digital, fully
phone, and fully in-person, and then lots of
steps in between. I think a lot of participants
end up taking an advice journey. They may
start fully digital, then ask some questions
by phone, and then finally, at some point
in their life, really value sitting down with a
human. That last step is so critical. Having
some sort of accountability partner who
can reinforce the importance of your plan
is really valuable, and we believe it still has
to be the centerpiece of advice and financial
wellness offerings.
PS: What about the cost of advice? How
concerned are participants about that?
VORIS: Participants know when a service is
worth paying for and when it is not. Transparency
helps. We offer access to personalized
advice and a managed account service
that may help them reach their destination.
When it is done well, I think everybody is on
the same page.
SPONSORED SECTION
Nathan Voris
PS: What sort of uptake do you see on
fee-based advice?
VORIS: It can be very high. Advice helps give
participants clear answers based on their
current financial picture that they can decide
to implement then and there or just continue
on their own. They can add a managed
account service, which gives participants the
opportunity to choose, for a fee, the benefit
of ongoing professional management of their
retirement plan account by a third-party
advice provider. More than seventy percent
of participants who go through that exercise
choose managed accounts.3
PS: What's the key takeaway here for plan
sponsors?
VORIS: Sponsors need to be promoting
advice. It's one thing to make something
available and quite another to encourage
participants to take advantage of it. When
our plan sponsor clients do that, we see very
strong uptake by participants.
For more information, visit
schwab.com/mas
1
Source: Schwab Retirement Plan Services, Inc.
401(k) Participant Survey, 2018.
2
Source: David Blanchett, 2014. " The Impact
of Expert Guidance on Participant Savings and
Investment Behaviors, " Working Paper (August).
3
Source: Schwab Plan data from January 1 to
December 1, 2017.
(1111-8WEU) (11/18)
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