Financial advisors who serve the small plan market expect to see “significant practice growth” in 2023—not surprising given that both employer and employee demand for advisor services is at all-time highs, according to findings from Vestwell’s fourth annual Retirement Trends Report released today.
An overwhelming majority of both small business employers and employees (90%) are interested in utilizing the support of a financial advisor to guide them through their options, noted the report, which surveyed thousands of advisors, employers and their workforces.
“Taken together, these results show a growing market made of employers who highly value financial advice and the services advisors provide…indicating that employers value an advisor who genuinely cares about their relationship and strives for mutual success,” Vestwell said.
In terms of adding value, employers said the services they value most from advisors are investment recommendations and management (65%), educating employees (62%), plan design recommendations (57%), plan administration (54%) and fiduciary oversight (50%).
A further 47% of employers said personalized investment recommendations for their employees was a value-add from advisors.
Additionally, 44% of employers reported that they were considering plan design changes, an area where they seek counsel from advisors.
“In short, small businesses value an advisor who is hands-on in ensuring the success of their plan, and they view success through the lens of employee satisfaction and ease of administration. Advisors who can provide a personalized experience to their clients, while also scaling to take advantage of the growing small plan market, are poised to succeed in the new year,” the firm said.
Also worth noting, 70% of advisors reported that market volatility has not affected their retirement business in the small plan market within the last year.
“Despite volatile financial markets, employers are considering upgrades to their plans and are interested in professional advice, while a plurality of advisors believe their practice will expand due to small plan growth. In other words, the small business market is on track to become a big business,” Vestwell said.
Increases to employer matches were the most popular plan change that employers made this year, representing 41% of plan changes.
Another 18% relaxed their eligibility standards and 31% of employers who made a change to their plan in the last year introduced auto-enrollment.
Both employers and employees want access to additional savings benefits through their workplace 401(k), Vestwell found.
Most participants were interested in adding a guaranteed lifetime income stream such as a deferred annuity, but only 40% of employers said they want to make annuities available through their plans.
“This suggests there is a potential opportunity for companies interested in exploring this option to highlight this as a differentiator in recruiting talent,” Vestwell said.
Some 66% of employers who said they want to expand benefits were interested in adding a Health Savings Account program, the report noted.
The majority (58%) of employers rated employee satisfaction as an important factor making it the most important determinant in defining plan success. Ease of administration (57%), plan cost-effectiveness (54%), and plan participation rate (53%).
Ironically, only 20% of employers reported that they include employers’ average contribution rate as a factor in determining plan success, Vestwell found.
To serve their small-business plan clients, 55% of advisors are utilizing managed accounts and 18% of advisors who do not currently offer managed accounts intend to introduce them in the next year, the firm said.