2024 DC Investment Forum: Financial advice ‘paramount’ to DC plan members’ success as they save for, enter retirement
However, the majority of plan members correctly understood that target-date funds get more conservative the closer they are to retirement and that the funds are an easy way to diversify their holdings. While 42 per cent of respondents said they aren’t invested in target-date funds, half of that group said it was because they don’t understand the benefits of the funds or didn’t know.
Read: 2021 DC Plan Summit: A look at how DC plan members value target-date funds, ESG investments
“You’re getting this surprising [finding] that, despite target-date funds being probably the most educated about investment selection, the most communicated about investment option, . . . the entire reason for the fund’s existence in the plan and its clear benefits aren’t well-known. That’s a bit of a problem,” said Nick DeLisi, relationship director for institutional relationship management at MFS, during a session at Benefits Canada’s 2024 DC Investment Forum.
The findings speak to one of the major underlying themes coming out of the survey, noted DeLisi: plan members need and want financial advice to navigate saving for and entering retirement. “Financial advice is incredibly paramount to the success of these members. Overwhelmingly, year after year, members say that they want advice and they will access it if it’s part of a group plan.”
Plan members said they want to receive that advice from a financial advisor, either in person or over video, he added.
MFS’s survey also delved into plan members’ financial habits and ability to save, finding three-quarters of respondents felt competing financial priorities were preventing them from adequately saving for retirement — and this was more pronounced in younger generations. There’s a stigma that younger members don’t want to save for retirement, but they’re actually saying the exact opposite, said DeLisi, noting they’re simply unable to meet their retirement savings goals given the numerous competing financial objectives they’re dealing with, such as saving for a house, childcare costs, managing student (and other) debt — something financial advice could also help to address.
Read: Head to head: Should employees be saving for retirement or focusing on other financial priorities?
Saving for retirement was the top financial focus area for all generations except for gen Z respondents, who were prioritizing managing debt. The survey also highlighted financial focus areas that were distinct to each generation: gen Z plan members were trying to save for a big purchase, millennials were saving for their children’s education, gen X was prioritizing minimizing their tax obligations and baby boomers were seeking to maintain adequate health-care coverage.
Three-quarters of Canadian plan members said they’ll need to save more than they planned and nearly three in five said they’ll need to work longer than they expected to in order to comfortably retire.
“Advice can help deconstruct a lot of these different issues that we see, whether it’s retirement confidence or competing financial objectives, whether it’s understanding the investments in your plan or what retirement is going to look like,” said DeLisi. “It’s very difficult [for plan sponsors] to communicate and educate to a very disparate group, but we think advice can really close that gap, be there for members and support them across their entire financial journey.”
Read more coverage of the 2024 DC Investment Forum.
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