Advisors are viewed as the key to the successful selection, implementation and management of small group retirement plans, a recent Guardian study found.
Nearly two-thirds (61 percent) of small-plan 401(k) sponsors who work with an advisor were “very satisfied” with their plan overall, compared with only 40 percent of sponsors who do not use a financial professional.
Plan sponsors who worked with a financial professional were more knowledgeable about plan requirements, including their fiduciary responsibilities, and generally offered plans that were better designed and include more advanced features, such as an employer match, target-date funds and a managed account option, says Guardian.
“Small-plan sponsors are increasingly realizing the value of working with third-party support services and financial professionals for outsourced solutions that help save time and mitigate fiduciary risks,” said Douglas Dubitsky, vice president at Guardian Retirement Solutions.
The survey found that 46 percent of respondents did not offer a retirement plan, with many citing the potential expense as the main reason. However, 58 percent of those indicated they were interested in setting up a plan within the next three years. This, coupled with the fact that nearly 30 percent of business owners did not know which type of plan was best suited for their company, illustrates a huge opportunity for advisors in the small-plan 401(k) market, says Guardian.
Underlying fees and expenses, including the potential cost of a match, were cited as major concerns when offering retirement savings plans in the workplace. Additional concerns for business owners included the time required to manage plans, along with the need to educate employees on how to manage their investments.
The study also revealed that small business owners were confused by their fiduciary roles and responsibilities with nearly one-third of plan sponsors not realizing they were, in fact, the plan fiduciary when asked.
“The fact that many non-sponsors are extremely confused by their options in the 401(k) market, reinforces what we have seen at Guardian for a long time – there are more and better opportunities for financial professionals in the small-plan retirement market than ever before,” said Dubitsky.
Brightwork Partners conducted the online survey of 451 senior executives from for-profit organizations with 25-249 employees between Nov. 12 and Dec. 14, 2013.