Plan sponsors believe financial advisors add value, so why do some hesitate to bring them on board?

(Photo: Shutterstock)

While the population ages and more people consider their retirement, the ability to manage funds properly is in question. Most people don’t follow their mutual funds or stocks carefully enough to make the day-to-day decisions needed to ensure resources last well into retirement.

That’s where financial advisors play a role. A new Morgan Stanley At Work survey shows that financial advisors deliver a peace of mind when it comes to oversight in investment management. Twenty-seven percent of plan sponsors report this peace of mind as a motivating factor for onboarding financial advisors. Once onboarding occurs, a whopping 93% of plan sponsors agree that the financial advisors support in regulatory matters is valuable.

There’s good news for plan participants as well. The survey points out that retirement plans with a dedicated financial advisor offers robust plan features such as offering a range of investment choices. Ninety-one percent of plan sponsors agreed that having a dedicated financial advisor provided them with guidance on critical plan design options. More options means more diversity for plan participants.

Also, 87% of plan sponsors agreed that when a financial advisor is offered within the workplace retirement plan, the company as a whole has better outcomes including higher employee participation and more eligible employees on track for retirement.

When asked about the right time to onboard a financial advisor, 35% of plan sponsors agreed the best stage of growth for the company is between the 20-100 employees mark. Only seven percent felt it was appropriate if there are fewer than 20 employees while 24% believed it was appropriate at the 101-300 employees mark. Twenty-seven felt it was a good time to onboard a financial planner at the 301-1,000 mark and only eight percent felt it was the right time after their company reached more than 1,000 employees.

What is the greatest hesitancy to bringing a financial advisor on board as part of the plan’s resources for employees? Cost. Fifty-six percent felt added fees were an issue while 28% believe financial advisors add no value and 14% believe their employees would never use the service.

“I think it’s worth it for a successful growing smaller business because the kind of cost-benefit analysis will show itself as you grow and add more employees. You get kind of more complex into people’s kind of financial needs…It’s just much harder to do it yourself or to kind of provide that advice as an employer,” said one plan sponsor surveyed in the report.

Different size businesses have different needs and motivations for using a financial advisor. 

Regardless of size, however, plan sponsors the number one advantage a financial advisor brings to their retirement plan is oversight to investment management (27%). This was followed closely by guidance and regulator concerns (21%).

The survey interviewed 350 plan sponsors that have a dedicated financial advisor with their 401(k) plan or has worked with an employer in the last 12 months that offered this resource.

Leave a Reply

Your email address will not be published. Required fields are marked *