Plan sponsors are increasingly offering financial advisor services

More and more plan sponsors are directing participants to financial advisors, according to an MFS Investments survey released Monday.

Currently, 64% of plan sponsors offer participant advisory services, and 17% are considering an option, according to the firm’s survey of 141 plan sponsors.

The connection with financial planning is determined in part by participants, with a separate MFS survey of 4,000 participants showing that 70% say they would use an advice service if it were offered to them, 20% say that they might use it and only 10% say they’re not interested. Many of those who are interested also want to speak directly with an expert, according to Savage.

“Plan sponsors are aware of this (demand),” Jeri Savage, senior retirement strategist at MFS. “It is understood that as people approach retirement they require more personalized needs and this is where the role of advice can come into play.”

For large plan sponsors, this is often done through managed account services, with plans $1 billion or larger primarily offering advice through managed accounts at 56%, according to the survey. Mid-sized plans ($100 million to $999 million) and small plans ($99 million to $25 million) have more general advisor offerings.

A very small percentage of sponsors, Savage notes, provide retirement services, about 1% of plan sponsors surveyed.

The retirement strategist also notes that because most plan sponsors already offer advice options, the connection with participants may be as much about increased or improved communication of these resources as it is about adding options .

Personal needs

This need for communication appears to extend to managed account services. Currently, managed account advisory services tend to be voluntary, with about 14% of plan sponsors offering them as a qualified default investment alternative, according to Savage. This compares to 55% offering the service to participants.

“Participants feel unique and need personalized advice,” says Save. “But they also want to be told what to do and need a little support.”

This advice is particularly necessary during times of market volatility or when managing life changes.

Savage also notes that MFS has asked plan sponsors to address many participants’ desire to embark on a phased retirement, as opposed to the traditional full retirement the system is typically built around.

About half of employers (49%) have or are considering adding “programs that would allow workers to gradually transition into retirement by reducing hours,” according to MFS. This finding highlights the need for more personalized advice and guidance regarding these more complex transitions, as well as how plan sponsors can guide participant outcomes, Savage says.

“This has implications for how we think about retirement income solutions,” she says. “Everything is so rooted in this goal of retiring completely when participants might prefer to do something different…. we need to think about how we can respond to them, which portends more advice and guidance.

Main areas of intervention

Of course, plan sponsors don’t rely solely on advisors to help participants with areas like market volatility or high inflation. MFS found that plan sponsors are more likely to add fixed income and inflation protection options than equity options.

The survey also finds that plan sponsors are more likely to replace equity managers than fixed-income managers.

When asked what keeps them up at night, plan sponsors checked off the five areas below of greatest concern:

• Evolving regulatory and legislative landscape (55%)
• Risk of litigation (44%)
• Overall administrative costs of the scheme (43%)
• Finding retirement income solutions for the plan (41%)
• Overall participation rates and savings rates (37%)

The MFS “Building Better Outcomes” survey was conducted from September to November 2023 among 141 plan sponsors of varying asset sizes. Plan sponsors were based in the United States and recruited through the DCIIA Plan Sponsor Institute.