Data and Research September 13, 2024

Improvement Needed in Retirement Plan Digital Experience

Despite improvement from last year, J.D. Power found that digital channels are often lacking and urges advisers to improve online experiences.

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As retirement plan customers increasingly rely on digital channels for managing their financial futures, the quality of those digital experiences has become crucial. However, according to the newly released J.D. Power 2024 U.S. Retirement Plan Digital Experience Study, most retirement plan providers still have significant room for improvement.

Only 21% of retirement websites and mobile apps met customer expectations for delivering a valuable digital experience, far behind other industries and potentially jeopardizing assets under management, the researchers found. For plan advisers, this could provide an opportunity to work more closely with clients and their participants.

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“The first and most important thing advisers should be doing when it comes to digital is to get familiar with the tools and resources their firms provide to clients,” says Craig Martin, managing director and global head of wealth and lending intelligence at J.D. Power. “This will allow them to spotlight capabilities that are aligned with their clients’ needs.”

Martin says advisers should also be asking participants about their digital usage habits and experiences. Having a good understanding of what participants are using and not using in the site, or app, can spotlight knowledge and awareness gaps the adviser could help fill that will increase the perceived value of the digital experience.

Financial wellness has become a key focus for many retirement plan providers, who aim to offer more than just basic financial products, according to Martin. However, without strong digital engagement, many customers fail to recognize or appreciate these efforts. This disconnect results in wasted resources and missed opportunities for business expansion, as providers struggle to communicate the value of their offerings to digitally disengaged users, Martin says.

On the plus side, J.D. Power did find that overall satisfaction with the retirement plan digital experiences has increased to 703 (on a 1,000-point scale), up 18 points from 2023. But those platforms still lagged behind other sectors such as insurance, automotive finance, utilities and banking. Retirement plan apps and websites struggled with ease of use and making information easy to find—critical aspects of a successful digital experience, according to the consumer research firm.

J.D. Power’s digital experience hierarchy rates retirement plan websites and apps across three performance levels: foundational, functional and valuable. Foundational experiences prioritize design, security and access to key information, while functional experiences focus on usability and navigation. Valuable experiences go further by offering personalization and proactive engagement. According to the study, 21% of retirement plan digital experiences did not meet the basic criteria for a foundational experience, and only 21% delivered what would be considered a valuable experience.

There is a clear connection between strong digital offerings and customer loyalty, according to the researchers. The study showed that customers are nearly twice as likely to retain their assets with a provider during a job change if the provider delivers a valuable digital experience. Furthermore, 40% of customers are more likely to roll over funds from other retirement accounts when they enjoy a superior digital experience.

The study, conducted from May through July, was based on responses of 5,638 retirement plan participants.

Administration September 13, 2024

Advisory Council Sees More Work Ahead for Retirement Income Products as QDIA

The council rounded up three days of QDIA discussion that focused primarily on creating a pension-like guaranteed income option in DC plans.

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The Department of Labor’s Advisory Council on Employee Welfare and Pension Benefit Plans, also known as the ERISA Advisory Council, on Thursday held the final discussion in this week’s series centered on retirement income products and their place within qualified default investment alternatives.  

Members debated the complexities of integrating lifetime income options into retirement plans and the broader implications for plan sponsors and participants amid the changing retirement landscape. 

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During the discussion, Alice Palmer, the vice president and retirement plan service chief counsel for the Lincoln Financial Group, highlighted key testimony from industry experts, drawing attention to the comparability of retirement income products. 

“Whether your money is in a Vanguard fund, or whether your money is in guaranteed income solution, what that translates to in retirement, depending on the product, can be equivalent,” she said.  

Palmer raised questions about how liquidation of these products affects retirees’ purchasing power and whether the value preserved in these solutions can match that of a traditional target-date fund. Palmer emphasized the need for further research on how annuity products influence retirees’ ability to maintain their living standards. 

Beth Halberstadt, a senior partner in and the U.S. defined contribution investment leader at Aon, echoed Palmer’s concerns, agreeing that there is a significant opportunity for more guidance on retirement and lifetime income options within qualified plans. She stressed that the current regulatory framework, particularly Section 404(c) of ERISA, does not provide detailed guidance on how fiduciaries should assess or select these products.  

“When we think about the rules that we have today, 404(c) is pretty high level,” Halberstadt said. “It doesn’t go into telling fiduciaries how to assess, how to pick, how to select.” 

However, Halberstadt cautioned the group against letting perfection hinder progress, encouraging incremental steps toward improving available guidance. She also called for a balanced approach that fosters creativity while mitigating litigation risks. 

“We know we don’t want to stifle innovation,” she says. “We’re already struggling in the DC space with innovation and litigation and trying to strike that right balance.”  

Another key voice, Holly Verdeyen, a partner in and the U.S. defined contribution leader at Mercer, raised questions about the council’s focus. She noted that much of the testimony and discussion centered on the lifetime income component, despite the council’s original mandate to examine QDIAs as a whole.  

Verdeyen emphasized the importance of determining how much of the final report should address the current state of QDIAs, suggesting that the conversation may have drifted too far into lifetime income products. Halberstadt agreed, but noted that foundational reports, such as those from Morningstar and Vanguard, could help address the gaps in testimony and provide a more complete picture. 

In its future work, the council intends to further evaluate how lifetime income products can be integrated into QDIAs and how these decisions will impact plan sponsors’ fiduciary responsibilities. It will continue to focus on balancing innovation with the need for clear guidance, ensuring that retirees’ financial security is maintained across various product offerings, according to concluding statements from the advisory made Thursday. 

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