• 80% of plan sponsors surveyed are using consultants in managing retirement plans

• Trends indicate preference is tipping toward higher-touch services

• Fund lineup and participant education singled out as strategic priorities

NEW YORK--(BUSINESS WIRE)--Oct. 21, 2024-- Morgan Stanley today announced results of its 2024 Retirement Plan Survey, providing insight into shifting 401(k) plan sponsor attitudes and tactics amid a constantly evolving financial landscape.

Retirement benefits remain essential for attracting and retaining employees, but as markets grow more complex, so do demands on defined contribution (DC) plan sponsors to help employees prepare for retirement. To compete, plan sponsors are under pressure to offer attractive benefit packages that address myriad employee needs and business demands. In response, most are turning to consultants for support—and seeking more holistic services.

Polling nearly 200 plan sponsor decision-makers with 401(k) plans with at least $50 million in assets—and 56 from organizations with 401(k) plans with more than $1 billion—the survey provides a comprehensive look at how retirement leaders are approaching their choices around selecting support, investment lineups and strategies for engaging participants. Key insights include:

1. Consultant Relationships Are in Demand

• Reflecting the need for guidance in an increasingly complex landscape, over 80% of plan sponsor respondents say they are currently using a consultant.
• The structure of consultant arrangements is also shifting toward higher-touch services: A 3(21) fiduciary acts as an investment advisor who makes investment recommendations regarding plan assets, while by contrast a 3(38) investment manager reviews investment options, makes investment decisions, and ultimately takes more fiduciary responsibility for the plan's day-to-day investments. Today, 3(21) relationships are still nearly twice as common as 3(38) relationships, (55% vs. 27%, respectively), but the gap appears to be closing—with most 3(38) users beginning their engagement within the past five years. In fact, nearly half of plan sponsors are either highly (6%) or partly (42%) considering working with a 3(38) investment manager.
• Among those not utilizing or considering a 3(38) investment manager, satisfaction with their current approach was the primary reason. On the other hand, top reasons plan sponsors cited for considering the switch to a 3(38) investment manager include reduced workload for executives, maximum investment liability transfer under ERISA, and the 3(38) investment manager’s ability to take immediate action for fund changes.

2. As Investment Lineups Expand, So Do Opportunities for Support

• Though most plan sponsors are not currently seeking to increase the number of asset managers they use, more than a third plan to expand the number of investment options they offer. Yet, a quarter cited challenges in changing their investment lineup, particularly when it comes to participant communication, regulatory filings and the cost of moving assets—indicating key areas where consultant guidance adds value.
• Most retirement plan sponsors are adding or have added target date funds with guaranteed payouts (71%), multi-asset strategies (65%), and hybrid default investment options (56%) to their offerings. Currently, 64% offer managed accounts, with another 22% planning to do so. And despite initial hesitation, 41% of sponsors now provide retirement income solutions—with an additional 44% intending to introduce this option to help workers turning savings into income post-retirement.

3. Participant Education Key to Success

• Given so much complexity, educational materials and other tools to engage participants are very important to the success of retirement plans, especially when adding new solutions. The top three popular tools provided through a 401(k) include online retirement planning tools (85%), online account review and analysis tools (74%) and written education content (73%).
• Consultants and investment advisors are now the most common source for participant educational resources, with nearly half of plan sponsors turning to their consultants (47%) to provide these services. This trend is expected to continue as consultants increasingly incorporate participant education into their offerings. Online tools are a favorite format, but nearly half of sponsors also offer live training, either online or in-person.
• Many plan sponsors identified participant understanding and involvement as key barriers to adding retirement income solutions to their plans, stressing the need for education resources.

"Retirement plans are adapting to address both company and employee needs, and our survey results show that it's not just about improving financial results, but about doing what's best for the future," said Jeremy France, Head of Institutional Consulting Solutions at Morgan Stanley. “Plan sponsors are looking for a variety of solutions to help them maintain competitive benefits, foster employee understanding and fulfill fiduciary responsibilities, but there’s no one-size-fits-all recipe. Instead, we believe that it’s only through tailored guidance that organizations can find the right blend of support, investment options and education to unlock the full impact of their plans.”

Morgan Stanley has built a robust offering across the full spectrum of advice, workplace and self-directed solutions. Through Institutional Consulting Solutions, comprehensive retirement services include investment advice and solutions for institutional investors; support for plan sponsors in managing retirement plans, navigating regulations and educating employees; and plan participant education and personalized guidance. For more information, visit Morgan Stanley Institutional Consulting Solutions.

The 2024 plan sponsor survey is the second in an annual series from Morgan Stanley Wealth Management focused on insights into the institutional landscape. The full 2024 survey results are available here.

About Morgan Stanley Wealth Management

Morgan Stanley Wealth Management, a global leader, provides access to a wide range of products and services to individuals, businesses and institutions, including brokerage and investment advisory services, financial and wealth planning, cash management and lending products and services, annuities and insurance, retirement and trust services.

About Morgan Stanley

Morgan Stanley (NYSE: MS) is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in 42 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com.

This has been prepared for informational purposes only and is not a solicitation of any offer to buy or sell any security or other financial instrument, or to participate in any trading strategy. This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a Financial Advisor.

When Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors (collectively, “Morgan Stanley”) provide “investment advice” regarding a retirement or welfare benefit plan account, an individual retirement account or a Coverdell education savings account (“Retirement Account”), Morgan Stanley is a “fiduciary” as those terms are defined under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and/or the Internal Revenue Code of 1986 (the “Code”), as applicable. When Morgan Stanley provides investment education, takes orders on an unsolicited basis or otherwise does not provide “investment advice”, Morgan Stanley will not be considered a “fiduciary” under ERISA and/or the Code. For more information regarding Morgan Stanley’s role with respect to a Retirement Account, please visit www.morganstanley.com/disclosures/dol. Tax laws are complex and subject to change. Morgan Stanley does not provide tax or legal advice. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a Retirement Account, and (b) regarding any potential tax, ERISA and related consequences of any investments or other transactions made with respect to a Retirement Account.

Past performance is not a guarantee or indicative of future performance. Historical data shown represents past performance and does not guarantee comparable future results.

This material contains forward-looking statements and there can be no guarantee that they will come to pass.

Diversification and asset allocation do not guarantee a profit or protect against loss in a declining financial market.

This material should not be viewed as investment advice or recommendations with respect to asset allocation or any particular investment.

Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC, a registered broker-dealer in the United States.

© 2024 Morgan Stanley Smith Barney LLC. Member SIPC.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241017986889/en/

Media Relations: Susan SieringSusan.Siering@morganstanley.com; Jeanne Joe PerroneJeanne.Perrone@morganstanley.com

Source: Morgan Stanley