A little more than one-third (36%) of 401(k) plan sponsors said that improving retirement readiness is the top priority for their 401(k) plan, according to a white paper issued by Cerulli Associates on Oct. 24.
The paper, "The Benefits of Personalization in Defined Contribution Plans: Analyzing Value in Managed Account and Financial Wellness Programs and Features," found that a key challenge for decision-makers at some of the top corporate defined contribution plans has to do with choosing the right personalized financial services for their participants. These plans usually have large and diverse participant populations with differing levels of wealth, financial challenges, objectives and preferences, Cerulli noted in a release issued in conjunction with the paper. As such, accommodating the needs of diverse plan participants requires "programs and features that can fill in gaps left by target-date funds or other less personalized offerings," Cerulli stated.
The paper also found that more than half (52%) of consultant-intermediated DC plans are looking at managed account programs to provide participants with greater access to personalized investment advice. However, the paper cautioned, some plan sponsors apparently underestimate the value that managed account programs can deliver to participants.
"When evaluating whether or not to offer a managed account program, plan sponsors should look beyond the investment returns to uncover the full value that these programs deliver to participants," said Shawn O'Brien, director-retirement at Cerulli, in the release. "Financial planning and wellness features, and the ability to speak with an adviser, may have a meaningful impact on participants' financial outcomes." Nevertheless, O'Brien added, plan sponsors "may need to employ different performance evaluation approaches to quantify their impact."
Plan sponsors have also focused on the importance of giving their participants access to financial professionals who can help them navigate financial dilemmas. Cerulli research showed that more than half of 401(k) participants prefer to speak to a financial professional rather than conduct the necessary research themselves when facing such issues.
Cerulli's white paper was based on 19 interviews with key decision makers at DC plans each having more than $250 million in assets.