Why CPAs Should Look to Retirement Planning Services

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Accountants who advise or plan to consult clients about retirement should take a good look at J.D. Power’s first study of the satisfaction level of investors in group retirement plans.

Providing this information can be a key differentiator for plan sponsors, and industry consultants and advisers, said Mike Foy, senior director of J.D. Power’s Wealth Management Practice. The study evaluates participant satisfaction with providers of group retirement plans, such as 401(k)s, based on six factors: interaction across live and digital channels; investment and service offerings; fees and expenses; plan features; information resources; and communications.

Plan providers are ranked in three categories based on their overall mix of business in terms of average plan size. Charles Schwab ranks highest in group retirement plan satisfaction in the large plan segment with a score of 824 on a 1,000-point scale. Nationwide ranked first in the mixed plan segment with a score of 770. PNC Retirement Solutions ranks highest in the small plan segment with a score of 806.

And, naturally, the more satisfied the participants are, the more likely they will recommend the provider and likely to consider them for a rollover to an IRA in the case of job change or retirement, according to the study.

Here are nine takeaways that advisers should consider:

  1. For all the talk about Millennials struggling with money, the study found that they are the most likely of all demographic groups to have set specific retirement goals and have the highest amount of savings—relative to age—in group retirement plans. Of the 51 percent of Millennials who have set goals, 83 percent say they believe they are on track to meet them.
  2. Almost two-thirds (61 percent) of Millennials have at least $25,000 saved for retirement, and 27 percent of them have more than $100,000, with an average of 30 to 35 years before retirement. In comparison, most boomers (75 percent) have more than $100,000 in savings with an average of three years before retirement. The average boomer will reach 65 with 3.4 years of their current income saved.
  3. Millennials also were much more likely (62 percent) to use mobile compared to 38 percent of baby boomers. Mobile, however, is appearing as an important channel but it isn’t replacing other types of interactions, Foy said during the webcast.
  4. Millennials and Gen Xers are more satisfied with mobile apps.
  5. The key drivers of satisfaction are communication, fees and expenses, information resources, plan features, investment and service offerings, and interactions.  The latter ranks highest.
  6. Fees and expenses are the most confusing to participants and many just don’t get what they are paying for, Foy said in the webcast. Only about a quarter (27 percent) said they completely understand fees. Fewer than half of survey participants said they were told about fees.
  7. Understanding mobile services wasn’t too far behind fees and expenses, with one in five participants saying that they understand the available mobile services.
  8. About 25 percent to 33 percent said they had used digital tools, and those who had were far more satisfied than those who hadn’t.
  9. About 20 percent of plan participants said they would definitely roll over their funds to their current plan provider in the future. But when they are digitally engaged and aware of guidance and education resources, and fees are transparent, the likelihood that they’ll keep their assets with the current provider is 48 percent.

The study was based on responses from more than 9,500 group retirement plan members.

About Terry Sheridan

Terry Sheridan

Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.

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