DC specialists have opportunity to further demonstrate the value they provide plan sponsorsVoya Investment Management survey reveals new findings about plan sponsor views on COVID-19, target-date funds and retirement income.
NEW YORK–(BUSINESS WIRE)–Voya Investment Management (IM), the asset management business of Voya Financial, Inc. (NYSE: VOYA), today announced the findings of the third edition of its survey of plan sponsors and defined contribution (DC) specialists focused on the retirement plan market. The survey was developed to help DC specialists better understand the needs of their clients and prospects and underscores Voya’s commitment to serving the DC space.
The survey, conducted in 2021 between mid-February and early March, found sponsors and DC specialists continue to share views on many aspects of retirement plan support and service, but where differences exist, they indicate that DC specialists feel their services add greater value than plan sponsors recognize — pointing to an opportunity for DC specialists to better demonstrate their value.
“Sponsors told us they are looking to specialists for a broad spectrum of advice and want higher levels of expertise, which again underscores the need for specialists to make sponsors aware of all that they can do,” said Jake Tuzza, head of Intermediary Distribution, Voya IM.
A change noted in this year’s survey found that sponsors are paying more attention to plan design issue, e.g., guidance on plan design and features is the second most frequently cited DC specialist support area. The 2021 survey did find upticks in sponsor recognition that DC specialists help keep plan costs reasonable (93%), and that DC specialist compensation is commensurate with the support provided (85%). Also encouraging, sponsors are more likely to say they understand the DC specialist’s compensation and fee disclosures (73%).
“Given the results of this survey, there are things specialists can do that demonstrate their value,” said Tuzza. “For example, articulate your value by drawing up an inventory of the services you provide to each sponsor and assess yourself on how closely your services focus on their priorities. We also recommend embracing ESG (environmental, social, and governance) in the investment selection process. We expect to see increased demand for ESG strategies — especially as younger employees come to represent a greater percentage of plan participants.”
The survey also looked at a number of other issues impacting sponsors and specialists, including:
Impact of COVID-19
The most common COVID-related impact on retirement plans was an increase in hardship withdrawals. Only one in five sponsors saw no impacts, and many noted the need for “post-COVID realignment” to drive better participant and plan outcomes. COVID amplified trends that already were underway, including increased attention to plan design, review/rebidding of service contracts and an emphasis on digital experience.
Use of Target-Date Funds
Many industry professionals see target-date funds (TDFs) as “foundational” components of a retirement plan and less of a forefront concern. Yet, mid-sized plans have significantly increased their use of TDFs since 2018, from 56% to 74%, in line with larger plans. Smaller plans now stand alone with lower usage levels at about 53%. In aggregate, nearly six in 10 sponsors include TDFs in their plans, up modestly from 2018. Of the aggregate, four in 10 sponsors whose plans do not currently offer TDFs, two in five say they’d prefer to include them, up from one in three in 2018 and one in four in 2016.
A majority of sponsors and DC specialists agree that the SECURE Act has encouraged plans to adopt a focus on retirement income. Offering a retirement income solution can complement financial wellness programs, such as online tools and calculators, education on retirement income planning and education on investing. While the majority of sponsors plan to offer retirement income options, such as guaranteed income for life products, these options are not yet widely offered.
Brookmark Research assisted Voya IM with the development, execution and analysis of the plan sponsor and DC specialist surveys. An online methodology was used to conduct the study, similar to 2018 and 2016. Plan sponsor and DC specialist surveys were very similar with only minor differences in the language used. Interviews took approximately 17 minutes to complete.
Voya IM repeated its online survey of retirement plan sponsors and DC specialists focused on the retirement plan market to:
Identify the evolving priorities and service needs of plan sponsors;
Help DC specialists align their services offerings to the priorities of plan sponsor clients and prospects; and
Identify unfolding opportunities and offer suggestions for DC specialists to help address them.
Certain exhibits distinguish plan sponsor segments by size of plan. The study divided sponsors into three segments: plans with $1 million to less than $5 million; plans with $5 million to less than $25 million; and plans with more than $25 million. In other exhibits, the study distinguishes between “heavy focus” DC specialists, whose practices emphasize plan sponsor clients, and “emerging” DC specialists, for whom plan sponsors represent a smaller proportion of business.
About Voya Investment Management
A leading, active asset management firm, Voya Investment Management manages, as of September 30, 2021, more than $230 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, 2018, 2019 and 2020 as a “Best Places to Work” by Pensions and Investments magazine. For more information, visit voyainvestments.com. Follow Voya Investment Management on Twitter @VoyaInvestments.