Advisor expertise more crucial than ever for retirement plan sponsors

As financial advisors enhance their expertise, plan sponsors are seeing better outcomes and higher satisfaction, according to the 15th annual Plan Sponsor Attitudes Study from Fidelity.

The study surveyed over 1,100 employers offering retirement plans through various recordkeepers, highlighting that nearly 90 percent of plan sponsors now use an advisor, with 80 percent expressing satisfaction as their plans meet stated goals – up from 74 percent in 2023.

The study found significantly better satisfaction rates reported among advised plans. Thirty-one percent of plans with advisor support are “very satisfied” with how well their goals are being achieved, compared to only 18 percent of non-advised plans. Additionally, 78 percent of sponsors believe their advisors provide good value.

 “We’re observing a clear relationship between the combined value of specialized expertise and plan satisfaction, with the catalyst being advisors evolving and engaging beyond the retirement plan,” Dalton Gustafson, head of Fidelity’s Intermediary Investment Client Group, said in a statement Monday. “Plan sponsors are only expecting more from their advisors, and we certainly don’t see that trend slowing.”

Fidelity found advisors are increasingly going beyond 401(k) guidance, addressing a broader range of financial topics. For instance, nearly 50 percent of plan sponsors now consider it “very important” for advisors to provide guidance on health savings accounts, a significant increase from just 25 percent in 2023. Additionally, 81 percent of plan sponsors believe advisors should extend their services to employees for overall financial planning needs.

The landscape of in-plan investments also appears to be evolving. The study found that nine out of ten sponsors adjusted their investment menus in the last year, including 32 percent who added CITs to their offerings. A quarter of sponsors indicated that directly hearing from target date fund managers influenced their selection process, with performance (22 percent) and advisor recommendations (19 percent) also being key factors.

The survey also revealed an apparent shift in the value-versus-cost conversation as nearly 60 percent of sponsors prefer more expensive target date funds with better historical performance net of fees, while 41 percent lean toward lower-cost options.

While 82 percent of plan sponsors feel confident in their ability to help employees save for retirement, with 78 percent seeing auto-enrollments and company matching as vital tools, other data points show challenges in workers’ retirement readiness.

Only half of employees retire at the expected age of 67, with 23 percent retiring later than planned. Over 70 percent of sponsors attribute these delays to inadequate savings.

“There appears to be a disconnect between the perception and reality of employee retirement readiness among plan sponsors,” Gustafson noted.