Top Trends Impacting 401(k) Communicators in 2017
As 2016 has come to a halt ushering in 2017 under a new administration, we look at the key trends impacting 401k communicators and what solutions are needed to provide plan participants with the best options in 2017. Let’s dive into the debate around lower fees, evermore investment product options, robo-advising, and the education needed to ensure both 401k communicators and participants are on the road to success in the year ahead.
- Low Fees Good; Lower Fees Better? There has seemingly been a race to the bottom on investment options in 401(k) plans in the past couple years. First it was the inclusion of more index mutual funds which gave way to ETFs. All of which has been driven by the notion that plan participants shouldn’t pay investment management fees for their investment products. But does a low fee product equal the right product for participants? Communicators for defined contribution plans should be careful to draw too much of a conclusion on the impact of fees to retirement savings, considering plan options that help participants meet their retirement needs.
Media Message for 401(k) Communicators: We want? a diversified portfolio of actively and passively managed investment options so participants can make the investment decisions that will best meet their unique needs for retirement.
- More investment product options are coming. ETFs are the latest product to appear in 401(k) lineups and 2017 promises to introduce more as the search for low fees and high return continue for plan sponsors. Look for Collective Investment Trusts (CITs) to find more investment share in defined contribution plans in the New Year as plan sponsors seek lower cost plan options. CITs' administrative expenses are typically lower than those of mutual funds because they are not subject to the many regulations that mutual funds must abide by. CITs also do not have the added expense of marketing because they are not targeting individual investors. But be careful, CITs are not subject to the Investment Company Act of 1940, which includes various regulations governing mutual funds, as well as extensive disclosure requirements. Media
Message for 401(k) Communicators: Recent innovations in investment products and 401(k) plan architecture provide participants with more options than ever to save for and achieve their retirement objectives. Combined with plan education, advice and research tools, participants have the resources they need to make informed retirement savings decisions.
- Welcome the robots. Robo-advisors are all the rage in the retail financial advisory community, but what about 401(k)s? In 2016 companies like Betterment and Wealthfront entered the 401(k) market with an automated advice option for plan participants. As individuals seek more information and holistic advice, look for more options to become available in 2017. But like any automated tool, participants should approach robo-advisors well informed. When used properly, a robo-advisor can be a powerful savings and investment tool for 401(k) participants.
Media Message for 401(k) Communicators: Robo-advisors can be a helpful resource for 401(k), similar to plan advice and participant education. Participants should take the time to enter all of their savings and investment information, plans and objectives to maximize the benefits of a robo-advisor. Your plan provider can be a useful resource to maximize the benefit.
- The Defined Benefit-ication of Defined Contribution. With the advent of robo-adivsors, automatic enrollment and products like target-date funds, many participants are asking their sponsors: why not manage my retirement savings for me? Defined contribution plan communicators should be ready with messages about finding the right balance between automation and individual empowerment to meet the needs of the participants. With tools available like plan advice, and a host of investment solutions, the participants have the power to shape their own retirement future.
Media Message for 401(k) Communicators: Plan participants have never had more options and education to craft the retirement savings plan that meets their unique needs. Speak to your plan provider about the tools available to maximize your saving and investment options, including advice and auto savings increases, which can drive savings forward.
These top 5 trends are why the New Year ahead marks an exciting and complex time for both 401k communicators and plan participants alike. Low fees are not the sole solution, but a diversified portfolio of both active and passive investment options is needed to ensure the best option for participants. ETFs are so 2016 while Collective Investment Trusts (CITs) have become the newest product on the market. But CITs are not without their risks so be sure to proceed with caution to make the most informed retirement decision. Lastly, will robots really take over the world in 2017? Not likely but robo-advisers are proving to add both value and savings for 401k participants. It’s essential for all 401k communicators to approach these new and automated investment tools with caution and educate their plan participants better than R2-D2 ever could.comments powered by Disqus