The Value Financial Advisers Bring to Plan Sponsors

In its new survey, “The Value of a Financial Advisor,” Morgan Stanley examines how plan sponsors feel about financial advisers and how advisers affect employee outcomes.

The survey considers the point at which plan sponsors feel it best to onboard a financial adviser, with 35% of respondents agreeing that the best stage is when growth is between 20 and 100 employees. If there was hesitation in onboarding a financial adviser to their plan, 56% of sponsors said it would be because of added fees, while 28% said an adviser would add no value and 14% said employees would not use one.

Plan sponsors value peace of mind, with 28% saying that oversight on investment management was the primary reason for offering a financial adviser to their 401(k) plan, the study says. With compliance (75%) and fiduciary guidelines (67%) seen as critical conditions, the study notes that it makes sense that sponsors would welcome the oversight.

The survey found that businesses of different sizes prioritized different needs. Small businesses with less than 20 employees named resources for employees (26%) as the primary reason for having a financial adviser. Enterprise businesses with over 3,000 employees reported needing investment oversight (37%) and growing midsize businesses with 20 to 100 employees were looking for guidance on plan design (20%).

Plan sponsors, regardless of their business size, reported that the No. 1 advantage a financial adviser brings to their plan is oversight of investment management (27%), the survey says. They also cited as advantages guidance for regulatory concerns (21%) and availability to answer employee questions (17%).

Most plan sponsors agreed that having a dedicated financial adviser to support their company’s workplace retirement plan delivers better plan outcomes (87%), encourages participation (86%), provides support for employee questions (92%) and is worth the cost (95%), the survey found.

Of those plans with a dedicated financial advisor, 85% or more, depending on company size, offered investment choices (e.g., target date funds, ETFs, company stock options, etc.) to their participants, according to the survey. In general, plans with financial advisers offered robust features such as automatic match, match options and automatic enrollment.

For the plans that currently offer a dedicated financial adviser, 85% reported that most or all of their eligible employees are on track for retirement, while plans that do not currently have one reported a lack of insight into retirement readiness, the survey found. When it comes to employee participation, 44% of plan sponsors who offer a dedicated financial adviser reported that 75% to 100% of eligible employees participate in their company 401(k) plan.