Study:Retirement Plan Providers Failing to Deliver Essential Guidance

The COVID-19 market volatility and complex new rules have created a need for increased advice from retirement plan providers, but a new study suggests that few are successfully addressing this growing need. 

 

What’s more, with record job losses since the onset of COVID-19, much of the money accumulated in these plans may potentially be lost if participants choose another provider for a rollover, according to J.D. Power’s 2020 U.S. Retirement Plan Participant Satisfaction Study. 

“The COVID-19 pandemic struck the U.S. right in the middle of the fielding period for this study, and it is crystal clear in our data that, as market turmoil increased, investor sentiment and economic outlook declined sharply,” says Mike Foy, senior director of wealth management intelligence at J.D. Power. “This left many retirement plan participants searching for answers and guidance that was simply not provided by their provider.”

 

Key findings of the 2020 study show that just 27% of retirement plan participants say they have accessed professional financial advice related to their plan and 29% are either unaware of whether such advice is available or perceive that it is not available to them.

 

What’s more, nearly a quarter (22%) of retirement plan participants say they’ve had no interaction with their provider during the past 12 months. The study observes that this is a problem for providers because frequency of interaction is directly correlated to participant satisfaction. Overall satisfaction scores increase 44 points (on a 1,000-point scale) when participants say they’ve had one to four interactions per year with their retirement plan provider and increase by 99 points when participants engage more than 20 times per year with their provider.

 

And with a likely surge in roll-in and rollover decisions in the coming weeks due to changes in employment, investor satisfaction is an important benchmark. Among participants who say they are “delighted” with their retirement plan provider, 51% say they “definitely will” retain assets in their current plan. That percentage falls, however, to just 12% when participants who say they are “indifferent” with their plan and to 7% among those who are “dissatisfied.”

 

 

The study suggests that proactive, personalized digital communications can have a positive effect on participant satisfaction, but few plans are delivering. It notes, for example, that communication satisfaction scores are 70 points higher when participants receive a personal communication via their retirement plan provider’s mobile app than when they receive a traditional email. Yet, just 15% of retirement plan participants indicate having received this type of digital communication.

 

“It’s impossible to overstate the financial implications for firms that get the participant satisfaction formula right during this make-or-break moment,” Foy emphasizes.

 

“Historically, some plan providers have been focused only on the plan sponsor and, while that is changing somewhat, firms need to be laser focused on participants as well,” he adds. 

 

 

Now in its third year, the study evaluates participant satisfaction with providers of group retirement plans based on six factors: 

 

Plan providers are ranked in three categories based on their overall mix of business in terms of average plan size. Here are the top five for each plan segment, which were all within a few points of each other on a 1,000-point scale.   

 

 

The study is based on responses of 10,159 retirement plan participants and was fielded in February-March 2020.