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The Top Three Pain Points for 401(k) Plan Sponsors

They are not fees, funds and fiduciary.

Abraham Maslow once said, “it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” For advisors focused on the selection of investments, acting as a co-fiduciary and helping plan sponsors limit fees, the defined contribution world seems simple.

Yet they are missing a great opportunity to differentiate themselves, increase revenue and really help their clients.

The top three pain points today highlighted in a recent training program for advisors who serve as adjunct lecturers at The Plan Sponsor University include:

  1. The Great Resignation
  2. Engaging a remote workforce
  3. Helping employees understand and navigate benefits offered at work

The Triple Fs of fees, funds and fiduciary, though important, have been commoditized. Focusing on these new pain points will result in an emotional connection because it shows the advisor understands the day-to-day issues many plan sponsors are currently dealing with as well as an opportunity to move retirement from a tactical to a strategic benefit.

With the war for talent raging, employers are focused on using benefits to retain and recruit workers—defined contribution plans tend to be the highest-rated financial benefit, which can become an important weapon if properly designed. The worksite retirement platform and communications can be used to engage remote workers, and these platforms are a perfect way to add on ancillary benefits like student debt repayment and emergency savings plans.

Though financial wellness usually tops the list of what plan sponsors want, it is hard to define. Ask 10 people what financial wellness means and you may get 10 different answers. The best financial wellness tool is one that helps each employee understand the benefits offered at work, optimizing them based on the worker’s family and financial situation.

It is also tempting to repeat the latest trends that resonate in the 401(k) echo chamber like ESG funds, managed accounts and pooled employer plans that may be important to some plan sponsors but do not solve essential, strategic issues.

Some retirement plan advisors might be tempted to just stay in their lane and offer the Triple Fs and, while they might get a good response, it leaves the door open for others to step into their place. There are tools that any advisor can buy relatively cheaply that analyze funds; there are third parties like Morningstar as well as tens of thousands of other advisors willing to act as co-fiduciaries; and focusing on fees can make an advisor vulnerable to cheaper options diminishing their value.

The focus of successful advisors with the right tools and training has shifted from plan-level services to participant or, better said, employee services where the opportunity to generate fees is significantly higher. Currently, RPAs are in a great position to help employers deal with their top three pain points all focused on workers.

Because if you do not address these issues, there is no doubt that a competitor will.

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

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