Navigating the next normal in the retirement industry

The needs of retirement plan sponsors and savers are changing, and advisors may want to consider a value proposition for the “next normal” in the shifting retirement landscape.

Coming out of a transformative event such as the COVID-19 pandemic, people may look for a “new normal.” At the same time, the pace of change we all face may lead to a series of “next normals” vs. a singular new normal. In this article, we consider: What will the series of next normals be for the retirement plan industry?

The needs of plan sponsors and savers are changing, and that means advisors may want to view their services differently, too. A next normal value proposition needs to look beyond the “three Fs” of funds, fees and fiduciary to include customized plan design and robust client engagement.

Enhancing retirement readiness

Customized plan design seeks to optimize participant outcomes and income replacement through tools like auto enrollment, auto escalation and stretch matches. Additionally, intentional engagement focuses on addressing holistic needs, including financial planning, budgeting, emergency savings and overall wellness.

Employers and workers are already signaling change. We observe an example of the next normal in the participant’s view around saving and finance.? Our 2024 Voice of the American Workplace Survey indicates the importance of financial wellbeing is rising among workers. Two-thirds of workers surveyed (65%) said they have overhauled their relationship with money.

The importance of financial well-being is rising; two-thirds declare overhauling their relationship with money

On a scale of 1-10, how much of a priority are each of the following financial concerns to you? (n=2,001 total | Top 2 on a 10-pt. scale) | Q107: How much do you agree or disagree with the following statements? (n=2,001 total | Top 2=Strongly/somewhat disagree) The Voice of the American Employer Survey was conducted by The Harris Poll on behalf of Franklin Templeton from November 6 to November 17, 2023. All 1,000 US respondents are classified as employers with over 100 employees. The Voice of the American Worker Survey was conducted November 9 to November 21, 2023, among 2,001 employed US adults, with some form of retirement savings.

With the convergence of state mandates to offer workplace savings plans and SECURE Act provisions that cover many fees associated with new plan establishment, interest in workplace savings plans is growing. At the same time, there is a heightened focus on customization and employee engagement. New plans can be well designed from the start, while existing plans may benefit from a thoughtful redesign.?

American workers call for more personalized offerings, both in their 401(k) and overall benefit packages

How much do you agree or disagree with the following statements? (n=2,001 total | Top 2=Strongly/somewhat disagree) The Voice of the American Employer Survey was conducted by The Harris Poll on behalf of Franklin Templeton from November 6 to November 17, 2023. All 1,000 US respondents are classified as employers with over 100 employees. The Voice of the American Worker Survey was conducted November 9 to November 21, 2023, among 2,001 employed US adults, with some form of retirement savings.

As demands increase for customization, so does the adoption of automatic features. ?Features like auto enrollment and auto escalation take advantage of a principle James Clear wrote about in his book Atomic Habits. The “automatically in unless you opt out” nature of these design features makes it “require more work to get out of the good habit than to get started on it”. (See endnote 1)

Turn insights into action

Here are three steps for retirement plan advisors to consider:

1. Learn Request For Proposal (RFP) systems: Become familiar with electronic proposal systems that seek to streamline and facilitate the RFP process.
2. Maximize practice efficiency: Investigate what role structured solutions—plans that have preselected fiduciary services and line ups—may play in maximizing the efficiency of your practice.
3. Optimize your client’s plan: Conduct plan reviews to ensure design innovation is providing a benefit for your existing clients as well as for new plans being formed. In other words, it seems prudent to put all existing plans through a review to determine whether the plan design is optimized.

As you consider the steps above, power your practice through partnership. Ask yourself, which partners actively work to make your practice more efficient? Which partners are your first call when you want to enhance what is working or overcome challenges?

Our retirement sales team is dedicated to walking with you to our next normal and the one after that. If thoughts like, “Change has never been this fast. It will never be this slow again” (see endnote 2)?are intimidating, recognize you have partners to help guide you. In particular, our Business Development Directors’ mission is to be your first call as you work on the initiatives outlined in this article.

Endnotes

1. Source: James Clear. Atomic Habits.? Chapter 14. 2018.
2. Change Has Never Been This Fast. It Will Never Be This Slow Again (forbes.com), December 31, 2019.