Study: Key issues have evolved, several new issues have arisen, including trend toward ‘holistic financial wellness’
July 15, 2019 — NEW YORK–(BUSINESS WIRE)–Voya Investment Management, the asset management business of Voya Financial, Inc. (NYSE:VOYA), today announced the findings of the second edition of its survey of retirement plan sponsors and plan advisors.
The goal of the survey, “Survey of the Retirement Landscape: Challenges and Opportunities for DC-Focused Advisors,” was to identify and better understand the current service needs of plan sponsors and help advisors better align their offerings and priorities to meet those needs. Though some perceptions have changed since the initial survey was published two years ago, views on a few key issues have evolved and several new issues have arisen, most notably an emerging concern for holistic financial wellness.
Among the critical findings of the Voya study:
- In our inaugural survey, advisors were far less sanguine than sponsors about plan participants’ retirement readiness. Those views have begun to converge, with advisors less pessimistic and sponsors less optimistic. Both advisors and sponsors see the need to improve retirement outcomes for plan participants.
- In tandem with evolving views of retirement readiness, sponsors would like to see broader financial wellness topics addressed in participant education.
- Sponsors are looking for expert guidance on a broader range of issues than two years ago, including alternative plan design, cybersecurity, financial wellness and special needs caregivers.
- Sponsors still are behind the curve in using risk-assessment tools to gauge the suitability of investments. They will need advisors to fill this gap.
- Sponsors do not always recognize the services advisors provide, potentially leading to confusion about what sponsors get for the fees they pay. Advisors need to communicate their added value more effectively.
“We found that the issue of retirement readiness is more of an issue for plan sponsors and is often an area where they could do more to address the topic with participants. On the other hand, advisors are more optimistic, perhaps because they have been able to convince their sponsor clients of how important this is and have provided them with the tools for those conversations,” said Michael De Feo, managing director, head of Retirement and Investment Only, Voya Investment Management. “Plan compliance remains a top concern for both advisors and sponsors, but a number of new issues emerged that weren’t on the radar of advisors or sponsors in the past, such as cybersecurity, which will only grow in importance.”
As an example of a newly emerging issue, according to the survey, advisors are twice as likely as plan sponsors to consider help for caregivers of people with special needs highly important: more than half of sponsors suggest it is less important or not important, whereas only three in ten advisors agree.
Advisors are more likely than sponsors to view a higher percentage of participants as caregivers. Small plans are more likely to estimate fewer than 5% of participants as caregivers or consider it important to focus on financial needs of these employees.
“When you consider that, according to the U.S. Census Bureau, one in five workers has a disability or one in six workers serve as a caregiver to an individual with a disability, you can see how important this is,” said De Feo.
Other Key Findings:
Deployment of target date funds expands
Use of target date funds (TDFs) rose significantly among larger plans. Across plan sizes, nearly six in ten sponsors include TDFs in their plans; roughly one-third of those that do not include them would prefer to use TDFs in the future — up from less than one-fourth versus the previous study.
Current service offerings
Sponsors and advisors generally agree on the kinds of plan support offered, though sponsors seem less likely to recognize the services provided by advisors. This misperception is likely to confuse sponsors about what they are paying their advisor to do, and points to a need for advisors to more effectively communicate their value-add.
Large plan sponsors are more likely to recognize their advisors provide support for investment selection and plan fiduciary responsibilities, but less likely to recognize support for financial wellness. By contrast, small- and mid-size plan sponsors are more likely to say their advisors support financial wellness, but perceive less help with selecting plan service providers.
Consistent sponsor preferences
Advisors generally believe that plan sponsors need help understanding fiduciary responsibilities, are overwhelmed by compliance burdens, demand more services and expertise from advisors and have a growing need for support. Sponsors are less likely than advisors to say they need support with these issues, though there have been minor changes in their views since the initial study. For example, in the initial study, 91% of sponsors said they prefer to work with an advisor who specializes in retirement plans; in 2018, that figure increased to 94%. Over the same period, demand for “more service/expertise from advisor” rose from 55% to 63%.
Evolving sponsor and advisor priorities
Without being prompted, sponsors and advisors offered different rankings of the most significant challenges they face. Sponsor priorities seem not to have shifted much. For example, increasing plan participation was a top concern and remains so in the most recent survey.
By contrast, “plan details” — short for “details related to the plan such as options, fees, match, investments, performance” — may have become more important. Interestingly, cybersecurity, an emerging issue that scored relatively low in other areas of the survey, made it onto the unprompted challenges list as well.
Comparing advisor and sponsor concerns reveals several discrepancies that may be important to advisors in tuning their mix of services to sponsors. While Advisors’ ranked fiduciary/compliance issues as their top priority in both surveys, they were ranked fourth by sponsors in 2018, suggesting there may be fewer opportunities to discuss this service than advisors think.
Conversely, market volatility gets ranked fifth by sponsors but only tenth by advisors; this suggests there may be greater opportunity here to offer services than advisors may perceive. Sponsors and advisors agree on the importance of educating plan participants.
In December 2018, Voya Investment Management repeated an online survey of retirement plan sponsors and financial advisors focused on the retirement plan market to better understand product, service, and support preferences, as well as identify unmet needs and emerging opportunities.
Brookmark Research and Practical Perspectives assisted with the development, execution, and analysis of the plan sponsor and advisor surveys. Similar to the initial survey, an Internet methodology was used to conduct the study.
Plan sponsor and advisor surveys were very similar with only minor differences in the language used. Interviews took approximately 12.5 minutes to complete and were collected in December 2018. The 2018 plan sponsor findings include 307 plan sponsors and the 2018 advisor findings include 204 advisors.
About Voya Investment Management
A leading, active asset management firm, Voya Investment Management manages, as of March 31, 2019, more than $209 billion for affiliated and external institutions as well as individual investors. With over 40 years of history in asset management, Voya Investment Management has the experience and resources to provide clients with investment solutions with an emphasis on equities, fixed income, and multi-asset strategies and solutions. Voya Investment Management was named in 2015, 2016, 2017 and 2018 as a “Best Places to Work” by Pensions and Investments magazine. For more information, visit voyainvestments.com. Follow Voya Investment Management on Twitter @VoyaInvestments.