Charles Schwab ranks highest in digital retirement plan participant satisfaction, but there is a wide gap between the top and bottom industry performers, according to a new J.D. Power study.
Despite the fact that virtually every participant interaction with their provider has shifted to digital channels, the majority of retirement plans are failing to deliver proactive guidance and many have made it difficult to find the information users are seeking on their websites and mobile apps, according to the company's 2021 U.S. Retirement Plan Digital Satisfaction Study released today.
The study, which asked 5,000 investors to score their retirement plan, ranked Charles the highest in retirement plan digital satisfaction with a score of 725 out of a possible 1,000. Bank of America (formerly Merrill Lynch) came in second with a score of 703 and AIG Retirement Services ranked third with a score of 699.
The top and lowest performers in this study were separated by nearly 100 points on a 1,000-point scale, the study said.
Just 24% of retirement investors strongly agree their provider offers proactive guidance and help, such as calculations of what their annual contributions are likely to create in annual retirement income and how increasing contributions will change that. Just 43% found it very easy to locate the information they were looking for on their retirement plan websites and mobile apps.
“For retention of assets, getting investor’s digital experience right is incredibly important,” Mike Foy, senior director of wealth management intelligence at J.D. Power, told Financial Advisor magazine.
“One of the reasons participants move their assets from company to company is they’re dissatisfied with their 401(k) plan today and when they decide what to do in the future when they change jobs, we see a very strong correlation between digital satisfaction and whether they keep their assets where they are,” Foy added.
Participants who receive proactive digital guidance from their retirement plan are 25% more likely to keep their retirement assets with their current retirement plan provider or roll over to a separate IRA with that provider, the study found. Despite these benefits, just 24% of retirement plan investors say they strongly agree that their retirement plan provider offers proactive guidance and help.
“Rollover clients are much more profitable for these companies than retirement plan participants. I was talking to an executive at one of the companies in our study who said they were bleeding money over their failure to get the advice component right, which was causing participants to roll over assets rather than keep them,” Foy said.
While proactive guidance is key to customer engagement, few retirement plans are delivering it, the study found. Effectiveness scores significantly increased by 51 points among participants if their retirement plan provided proactive guidance via digital channels.