More and more companies are going a step further and enhancing auto-enrollment with an auto-escalation feature. Thanks to auto-escalation, after a handful of years, many employees will have potentially doubled their savings rate. In addition to auto-escalation, education plays a big role in helping participants save more. We have found that when participants are told the rate that they specifically need to save, they are compelled to increase their deferral rate.

The most dramatic change on the investing front is the uptake of model portfolios and target-date funds. According to Vanguard, “84 percent of plan sponsors offered target-date funds at year-end 2012, up 45 percent compared with year-end 2007.” The same report says that, “51 percent of all participants use target-date funds.”

Why the big surge? Participants seek a simple solution, and education about their ease of use, glidepath methodology and rebalance feature is having a robust impact. Additionally, since the PPA, plan sponsors are often utilizing them as the qualified default investment alternative (QDIA).

When it comes to investments, the industry is also moving toward open architecture (no proprietary funds required) and an overall reduction in fees. Many participants are seeing fees for the first time and are migrating toward funds with lower expense ratios. Another impact of fee transparency and open architecture (enveloped in academic research) is the uptake of index funds in the line-up by plan sponsors.

Today’s advisors are different from advisors of yesteryear. As we move forward, advisors must be more focused on the participant providing tailored and more relevant education, addressing investor behavior, and helping participants save more.

Michael Lissner is a partner with Acropolis Investment Management LLC, a St. Louis-based, fee-only wealth management firm, serving individual investors and 401(k) plan sponsors. Acropolis specializes in retirement planning and currently has over $1 billion in AUM. For more information, visit

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