401(k) Specialist Issue 3 - 2024 - 39

401(k) BEST PRACTICES
3 Ways Financial Guidance Adds Value for
401(k) Participants and Employers
By Tom Conlon
WITH FIVE GENERATIONS working together
for the first time and roughly 75% of the U.S.
workforce under age 55, the way we think
about retirement plans continues to evolve.
The stakes are high as 401(k) plan providers
and sponsors seek solutions capable of
helping participants contextualize retirement
preparation across many ages and circumstances,
and access to professional financial
guidance is becoming a key differentiator.
Generally, financial planning begins as a
conversation between an advisor or Certified
Financial Planner and an individual, yet the
barrier to entry can be high: Many advisors
require minimum investments, and just 15%
of Gen Z and 35% of Millennials work with
a financial advisor to plan for retirement or
manage their retirement assets. That's where
retirement plan sponsors and workplace
benefits come in.
1. Real-World Consequences:
Navigating Complexity in
Retirement Planning
Improving plan outcomes and individual
retirement readiness requires a more holistic
perspective both at the plan and individual
level-with guidance on saving and investing
strategy, asset allocation and more.
Both organizations and individuals are
increasingly prioritizing retirement planning
assistance, often from human advisors: In our
recent State of the Workplace research, we
found that employees `rank` assistance with
retirement preparation, financial planning
and goals-based retirement investment
planning as their top in-demand benefits.
What's more, retirement plan participants
value guidance even more highly compared
to the general employee population: Employees
who participate in their company 401(k)
s are more likely to say they need financial
investment planning support (77% vs. 68%),
and retirement planning assistance itself is so
important to retirement participants that 63%
comprehensive individual financial plan that
encompasses their outside assets and various
financial goals.
say it is a top or high priority when choosing
where to work.
According to PwC, only about a third of the
U.S. workforce thinks their own retirement savings
plan is on track. That means nearly two in
three employees may be struggling with key
decisions such as when to retire, how to manage
assets and accounts, when to claim Social
Security, how to navigate healthcare costs, and
what asset allocation may be appropriate at
each life stage.
2. Deep Impact: Participants are
Feeling the Pressure
Sponsoring a retirement plan means operating
in the best interest of plan participants,
which includes listening to their feedback and
providing relevant tools and resources.
Holistic guidance from a financial advisor
helps place crucial decisions in context as plan
sponsors and individual participants navigate
strategies to help maximize workplace benefits,
balance various goals, and reduce retirement
risks such as insufficient savings, excess
withdrawal, behavioral investing mistakes,
longer lifespans, inflation, and more. Additionally,
many workplace benefits providers
may also offer opportunities for participants
to access more personalized guidance by
consulting one-on-one with a financial coach
or advisor, who can help them develop a more
3. Casting a Wider Net: Financial
Support Also Helps Plan Sponsors
Along with addressing participant planning
needs, financial advisors also provide
direct support for plan sponsors in terms
of overseeing investment management,
fiduciary, and administrative responsibilities.
In fact, our data shows that investment
oversight often causes anxiety for plan sponsors
and is the No. 1 reason they consider
advisory services.
In our study of plan sponsors, we found consensus
that financial planning and professional
guidance provide tangible benefits for company
retirement plans: 87% of plan sponsors
say their company as a whole has better plan
outcomes when a financial advisor is available
for consult through the workplace retirement
plan, including higher employee participation
(86%) and more eligible employees being ontrack
for retirement (86%). A financial advisor
can also help by making recommendations,
performing needs assessments and provider
searches, helping field employee questions,
providing investment guidance, and alleviating
administrative pressures.
No matter an employee's life stage or a
company's current retirement plan setup,
one theme remains constant: Reaching
retirement readiness requires thoughtful
planning, early and often. Retirement plan
advisors can make plan sponsors aware of
resources available to help employees build
deeper connections between their workplace
retirement plans and a more holistic,
360-view of their financial wellness.
Tom Conlon is the Co-Head of Retirement Solutions
at Morgan Stanley. Tom and his team focus their time
on helping financial advisors grow their retirement
business with their wealth management practices.
ISSUE 3 2024 | 401kSpecialist.com
39
401(k) Specialist Issue 3 - 2024

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