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The Case for More 401(k) Education and Training

Empty certifications that require no experience and limited interaction only add to plan sponsors’ mistrust of the industry.

401(k) plans have changed dramatically since their inception from a supplemental savings plan to the prime source of retirement income. They are about to change even further as over 100 million workers, a number that could increase drastically with government mandates, begin to rely on workplace savings platforms to deal with more than just retirement issues.

To address these needs, the regulatory and legal structure needs to be updated, the record-keeping technology requires major upgrades as issues like cybersecurity test their limits, but perhaps more importantly, the professionals responsible for overseeing the system need better and more education and training.

I ask three questions at the beginning of each half-day program at The Plan Sponsor University:

  1. Is overseeing and administering your organization’s defined contribution plan your only job?
  2. Do you have formal training?
  3. Have employees ever asked which funds they should choose?

The answers are very telling.

Once in a blue moon, someone says they focus only on their DC plan, usually mega-plans. Just as infrequently are they provided formal education—in fact most get their job when someone walks in their office and announces, “Good luck, you are now in charge of our 401(k) plan.” And then walks out.

The questions from employees about which fund to choose show that in moving from DB to DC plans, the burden and liability have shifted from experienced pension professionals to ill-equipped employees.

We can change the laws all we want, we can upgrade systems and offer better cyber protection, but until we do a better job of training and educating people properly, giving them the tools needed, the results will be severely muted.

Just as the auto plan helped participants to accumulate assets without educating them, many plan sponsors have relied on their providers and independent fiduciary advisor to help run their plan. But just as we need participant engagement for decumulation, plan sponsors need to be more engaged and are asking for more education and training.

For example, 9,200 plan sponsors representing $713 billion in plan assets and 11.6 million participants have attended 525 TPSU programs since 2013. That demand only increased during the pandemic with over 2,000 attendees representing $254 billion and over 4 million participants. Average attendance has risen from 10 to over 28 over a 10-year period.

The demand is real.

Just as we need to reengineer provider technology and enact new laws, training and education needs to be reimagined. What we learned from professors and staff at UCLA Anderson School of Management’s Executive Education department, a collaborator with The Retirement Advisor University and the C(k)P and iC(k)P certifications, is how adults learn, which is vastly different from what is being offered in the DC market.

Adults learn by interaction, not listening. They trust peers more than experts who are needed to a greater or lesser extent depending on the level of experience of the audience. Any hint of bias or sales severely limits their openness and willingness to share, which severely limits the effect.

With the graying of RPAs and the need to engage wealth advisors, more and better education is needed, which is not possible through empty certifications that require no experience and limited interaction and only adds to plan sponsors’ mistrust of our industry.

The need and opportunities to train and educate plan sponsors and advisors are growing but we must reengineer the programs and take advantage of the use of video and remote learning courtesy of the pandemic. Because if we do not get this right, we have little hope of addressing the retirement industry’s biggest challenge—engaging and educating people at work, which must be totally reimagined.

Fred Barstein is founder and CEO of TRAU, TPSU and 401kTV.

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