In the 403(b) world, new survey results link participation and contributions rates to the number of providers available to choose from. If you thought that rates increase with fewer choices, you would be wrong! New survey data released today by the National Tax Deferred Savings Association reveals that increased participation and contribution rates actually increase with the number of provider options offered to participants.
Some highlights of the survey show that for plans with 15 or more providers:
- Participation rates are 25% higher than plans with only one provider
- Contribution rates are 203% higher than for plans with one provider
- Average account balances are 73% higher than for plans with only one provider.
- Participants with more provider choices say they are more satisfied with the plan than those with fewer choices.
- Plan providers who scaled back the number of providers often saw participation decrease afterwards, sometime dramatically.
School districts providing retirement planning education, often provided by an advisor, also correlated in increases in participation. Districts which offered education to participants saw a 5% increase in participation rates over those that did not.
The report also highlighted findings from recent research by AXA Equitable Life that showed the benefits to participants of working with a financial advisor including:
- Nearly double the median account balance
- Greater asset diversification
- Contribute 49% more to the plan
- Increase contributions more often
- Higher satisfaction and greater confidence in reaching retirement goals
Providers or advisors looking to be added as a plan provider option can help the school district understand the value to the participants of offering a variety of provider options, how his variety actually increases participation and contributions. Advisors looking to market their services can also point out the value, both financially as well as in confidence and satisfaction, that working with an advisors brings to participants.
In the end, it turns out that simplified choices are not always what people want. In composing 403(b) provider options, school districts would do well to provide their participants with the breadth and depth of provider choice that participants desire.
Advisors looking for solutions to help them engage more effectively in the 403(b) marketplace should take a look at TRAK's innovative solutions for 403(b) advisors.