Opportunities for retirement plan advisers have never been greater. But so are the challenges.
The stakes are high, given the lack of retirement plan coverage for half of America's workforce and the fact that most workers are woefully unprepared for retirement. Advisers have been thrust to the forefront, as most small and mid-size companies do not have the time or knowledge to help their employees prepare for retirement.
Here are the three biggest hurdles 401(k) plan advisers must overcome, and the New Year's resolutions they should be making to have any hope of solving the retirement crisis.
No. 1: Getting plan sponsors' senior management to really care about their 401(k) plan
At a recent educational program for plan advisers, almost all advisers in the room said they either don't have access to senior managers at the companies sponsoring retirement plans, or, when they do, that they are not confident about making a far-reaching presentation on the costs to companies if older employees aren't able to retire; instead, they focus on stale themes like "
fees, funds and fiduciary."
It was an honest yet sobering discussion. While I agreed that getting senior managers — the decision-makers — to see how their 401(k) plan can affect the bottom line is challenging, and the insight is bound to often fall on deaf ears, high-value specialist advisers that can't make the argument will continue to
see their fees decline while the demand for services rises. That is clearly unsustainable.
No. 2: Integrating retirement with other benefits like HSAs
Most 401(k) and 403(b) advisers like to "stay in their lane," staying clear of other company benefits. Though health savings accounts are the
darlings of the 401(k) intelligentsia, most retirement plan advisers are not comfortable getting involved with any benefit beyond retirement.
Not only are there additional revenue opportunities, the integration of benefits for organizations and their employees makes too much sense to avoid. Whether through partnering, acquisition or just plain education and hard work, plan advisers need to be able to have cogent discussions about managing all types of benefits, not just retirement.
No. 3: Improving employee behaviors and moving the needle on retirement readiness
Financial wellness is
currently more of a buzzword than a reality. Very little current financial education is changing behavior, while meaningful personal advice is an expensive service for which most people and organizations are not willing to pay.
One simple and cost-efficient solution can be found at the crossroads of behavioral finance and big data.
Information readily available on record-keeping systems can easily make default investment options more meaningful and create the equivalent of personal liability-driven investments. Further, companies like Yodlee are making information about outside assets more transparent, providing a true financial picture of an individual. Behavioral finance tools can automatically push, nudge or suggest better solutions while people are saving or during their distribution phase.
Advisers need to push their partners to offer these tools and make participant data more transparent while also incorporating robo solutions into their practice. They should make financial wellness a goal, not just a buzzword.
These hurdles may seem insurmountable and the resolutions overly aspirational, but the retirement crisis is real. It requires big and bold solutions driven by a coalition of enlightened providers, advisers and plan sponsors, especially their senior management. Big problems require overarching solutions.
Fred Barstein is the founder and CEO of The Retirement Advisor University and The Plan Sponsor University. He is also a contributing editor for InvestmentNews'
Retirement Plan Adviser newsletter.
