by Craig Rosenthal
Jan 24, 2022
As we begin 2022, a number of key issues and trends are set to impact retirement plan advisors and their clients. Clients are becoming more fee-savvy, demand is growing for low-cost, flexible retirement investment solutions. In addition, the Great Resignation and the resulting tight labor market has given workers the upper hand in demanding better benefits packages from employers. Financial wellness tops the benefits wish list, as the coronavirus pandemic exposed the fiscal fragility of many American households.
Now is an opportune time to set yourself up for success in the coming year. Here are some hot industry trends you can expect to be front and center, as well as thoughts on how to leverage them to scale your practice while managing your client relationships and business more efficiently.
The pandemic cast into stark contrast the importance of financial health and planning for everyone, especially individuals with meager retirement or emergency savings. There will be a continued emphasis on financial wellness in 2022, as it has become abundantly obvious that shoring up participants’ short-term financial wellbeing is among the most effective ways to close the retirement savings gap and better prepare them to reach longer-term goals.
In addition, employees want assistance with their personal finances, and they are demanding workplace benefits to help them achieve their goals. According to a recent study, 78% of employees said it’s important for their employer to offer financial wellness benefits, and 71% said these benefits are even more important than they were before the pandemic. Delivering financial wellness solutions adds another revenue stream to your bottom line, and a vehicle to provide additional value for employers keen to offer competitive benefits that will aid them in recruiting and retaining talent.
Student loan debt continues to plague millions of Americans of all ages, to the tune of trillions of dollars. It also represents a barrier to financial wellness and retirement savings. Employers are offering benefits to help lighten workers’ load so they can free up cash to save for future goals – a trend that’s likely to continue in the year ahead. Such solutions include student debt repayment programs and matching contributions to retirement plans on employees’ behalf.Helping workers pay down student debt so they can clear the way to work on future goals can be impactful when it comes to improving financial wellbeing, gaining trust, building long-term relationships and helping them reach retirement security.
Target date funds have dominated as the qualified default investment alternative (QDIA) of choice since the Pension Protection Act was passed in 2006. TDFs are user-friendly for retirement plan participants, and they make it easy for savers to automatically maintain appropriate asset allocations for their age and stage of life.
However, there is growing interest in additional customization for retirement investment solutions. Enter managed accounts, which when incorporated into a retirement plan design, can provide a more tailored approach for investors, particularly as they enter the later stages of their careers. Increasingly, participants may be defaulted into a TDF until they reach a specific milestone, say, turning age 50, at which time their assets are transitioned into a managed account. This approach provides a glidepath, which then transforms into a more personalized investing strategy as participants near retirement.
Additionally, managed accounts have become more accessible and affordable for lower-balance participants as they have evolved to include new product enhancements and pricing structures. Since the advice fees are baked in, managed accounts not only improve business efficiencies, they also make it feasible for lower-balance participants to gain access to professional portfolio management, fiduciary support and transparency at a lower cost.
In an industry challenged by fee pressure, it may make sense to consider adding collective investment trusts to your arsenal of offerings. Generally, CITs have lower marketing, administrative and distribution costs when compared to mutual funds.
Moreover, CITs can help you address fiduciary concerns. CIT trustees are considered 3(38) fiduciaries under ERISA, which may give you an edge to provide your plan sponsor clients with additional value and liability protection. In addition, CITs offer transparency, as several tickers are now available for public search. CITs are another way you can ensure your clients have access to low-cost, flexible investment options.
It’s well documented that the pandemic gave rise to a significant increase in remote work. That means an uptick in the use and variety of laptops and mobile devices to get work done. As such, the start of a new year may be a good time to review your current website to ensure that it is mobile-friendly and accessible to a wide variety of users and devices. Similarly, you should ensure that the tools and apps you use in your practice, both internally and with clients, are also efficient, mobile-friendly, and easy to use.
FDI’s Business Management Dashboard is an open architecture solution that can be integrated with many tools and services to help you streamline the management and use of your plan data and tools, gain workflow efficiencies and work from any mobile device.
It’s also important to make sure your clients’ fiduciary documents are up to date heading into the year ahead, including Summary Plan Descriptions (SPDs), Form 5500s, Investment Policy Statements and Committee Charters. Our handy Fiduciary File Checklist can help you get organized and streamline your annual plan review process.
Are there other trends on your radar for 2022? Let me know what you’re doing to improve your practice and deepen client relationships in the year ahead at email@example.com.
Craig is Head of Strategy and Chief Marketing Officer for Fiduciary Decisions. In this role, he is responsible for driving Product and Partnership strategy as well as the overall messaging and marketing for the firm.
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