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Defined contribution retirement plan advisors are increasingly prioritizing income solutions to help participants navigate the complexities of their post-work years. The latest research from Escalent’s Retirement Plan Advisor Trends™ highlights a sharp rise in advisors recommending these options, growing from 21% in 2022 to 30% in 2024, with more expected to follow. 

Despite this uptick, no single approach has emerged as the standard, underscoring the need for continued innovation. Popular strategies include income-generating bond funds, target-date funds with guaranteed income components, and systematic withdrawal programs, although high fees and portability concerns remain significant barriers. 

A separate Escalent study reveals that only 17% of plan participants feel confident in converting savings into sustainable income, particularly among Gen Xers. 

Finsum: This presents a clear opportunity for financial firms to educate advisors and develop innovative solutions that address these anxieties while tapping into a growing market.

A recent study highlights the significant impact of engagement on 401(k) savings, with active participants saving far more than those who aren't involved in their retirement planning. According to Empower's research, engaged individuals contribute 56% more to their retirement accounts, and those actively participating in their plan's resources save even higher amounts. 

These engaged savers are also more likely to fully utilize their employer's match, with 22% of them missing out compared to 48% of disengaged participants. The study also shows that those who consolidate their financial accounts or seek advice tend to save nearly twice as much as their less engaged peers. 

With fewer workers feeling confident about making investment choices, many are turning to financial professionals, which boosts their confidence in securing a comfortable retirement. Despite facing inflation and economic uncertainties, a majority of Americans remain optimistic about their long-term financial future, although short-term financial concerns have shifted their focus from retirement goals to immediate needs.

A financial movement of massive proportions is unfolding: billions of dollars are flowing from 401(k) plans into rollover accounts. Advisors see this as a golden opportunity, and research suggests this trend will persist, offering a potential boost to their businesses.

However, unlocking this opportunity requires understanding participant behavior. Notably, a significant portion of advisor-assisted rollovers involve existing client relationships. This underlines the crucial role of building rapport with individuals early in their careers, well before they face rollover decisions.

While establishing connections is paramount, not all advisors have the resources to cater to every participant. This has led to a collaborative approach, with some advisors partnering with recordkeepers to segment participants. In this scenario, advisors focus on those participants whose account balance size requires more time and effort to service, while recordkeepers assist others.

This partnership approach ensures participants receive the best solution, regardless of account size. It also transforms the advisor-recordkeeper dynamic from adversarial to cooperative, creating a win-win situation for all involved.

By actively fostering relationships and embracing strategic partnerships, advisors can effectively ride the rollover wave and expand their wealth management reach. This requires a proactive approach, recognizing that long-term relationships are invaluable in capturing this lucrative opportunity.

Finsum: The key to capturing 401(k) rollovers lies in building relationships; with plan participants and plan recordkeepers.

The era of employee-funded retirement began decades ago with the rise of 401(k) plans. Ever since, employers and service providers have been looking for ways to increase participant savings rates within these plans. Research conducted by Empower sheds light on a key to making this happen.

The study found that "engaged 401(k) plan participants are saving at significantly higher rates than that of unengaged participants, demonstrating that getting people involved in their retirement planning is a key component of driving better outcomes."

One way to engage participants is to provide them with access to in-person advice. Yet, not all plan advisors are equipped to deliver advice to all the participants within the plans they advise. Here's where fiduciary support from the plan's recordkeeper can be invaluable.

While partnering with recordkeepers capable of participant-level advice, plan advisors can selectively choose which participants for whom they are best suited to provide advice. The recordkeeper's advice program is an ideal solution for the remaining participants – usually those with smaller account balances or less complex questions.

Fiduciary services such as participant advice are integral to engaging participants, boosting savings rates, and helping them invest wisely. By partnering with the right recordkeepers, plan advisors can enhance the quality and efficiency of these services, benefiting all involved parties.

Finsum: An Empower study shows that engaged 401(k) plan participants save at a higher rate than unengaged participants underscoring the importance of finding ways to get involved in their retirement planning.

As recently reported by PlanAdviser.com, payroll giant ADP has collaborated with Morningstar to introduce a proprietary managed accounts product to their over 100,000 DC recordkeeping clients. Morningstar emphasized the complexities today's plan participants face in retirement savings, particularly given the backdrop of high inflation and market volatility, which can be especially challenging f or those employed by smaller firms.

Chris Magno, Senior Vice President and General Manager of ADP Retirement Services, underscored the sentiment, stating, "Every retirement plan, irrespective of its scale, deserves access to tailored advice on a large scale."

It's clear why the availability of managed accounts continues to spread. Historically, DC plans have often presented their participants with two primary investment avenues: self-managing their portfolios or selecting predefined options like target date or balanced funds. Managed accounts, however, introduce a third, more collaborative method. These accounts consider not only age and risk preferences but also additional factors, such as assets held by participants outside their 401(k).

Integrating managed accounts can enhance the bond between advisors and participants. Advisors typically play a pivotal role in defining the managed accounts program guidelines and engaging with participants opting for this route. For advisors yet to explore managed accounts, they are worth a closer look. They support the plan sponsor's objective of helping their employees reach a secure retirement while fortifying the advisor's rapport with participants.

Finsum: ADP and Morningstar launch a managed accounts product for DC clients, bridging traditional retirement savings methods with innovative solutions.