man holding millions of dollars Schwab’s study is comparable to myriad other industry surveys in that it shows 401(k) savers want help. (Photo: Shutterstock)

How do you stand out as a recordkeeper to 401(k) plans in what could be described as a highly commoditized marketplace?

A lot of it comes down to “old school blocking and tackling,” says Nathan Voris, managing director, business strategy, for Schwab Retirement Plan Services.

For the second year in a row, Schwab took home top honors in J.D. Power’s Retirement Plan Participant Satisfaction Study.

“We have the happiest clients in industry,” says Voris, matter-of-factly, who concedes the competition has many similar bells and whistles and that a lot of providers in industry do some things very well.

Schwab’s approach to sponsor and participant service—each client is supported by a relationship manager, conversion manager, communication consultant, and a compliance team—isn’t novel, said Voris.

“Everyone has services like ERISA compliance behind their platforms. Our aim is to differentiate through our service. We work hard at that. It’s our culture, our training that differentiates our approach,” he thinks.

Schwab’s retail brand, built on low-cost, simplified solutions for rank-and-file to sophisticated investors, translates to its workplace products. “Culturally, that really comes through.”

Voris’ job, in a nutshell, is to lead the team that designs the experiences and tools around Schwab’s platform that “get people to take action and control of their future.”

That means deploying tools backed by science and behavior, and knowing which bells and whistles to include and which to dismiss.

“We don’t have an Apple Watch app that only tells you your balance. That looks pretty but it doesn’t work to drive action. We only use tools that get people to take the action that’s best for them. Sometimes that doesn’t look the coolest, but that’s not what we’re trying to do,” explained Voris.

$1.7 million

Exactly how much does a person need in savings to live out their golden years fruitfully?

How about $1.7 million–the average guess advanced by respondents in Schwab’s 2019 Participant Survey.

“That’s a pretty good number. We were pleased with it,” said Voris.

While that estimate betrays plan participants’ healthy respect for longevity, this year’s study also revealed a bit of cognitive dissonance among those who realize they will need a substantial nest egg to pursue the after-work life they want.

“They know what they need to attain, but there’s too much going on in their lives that’s preventing them from taking the necessary steps to get there,” he said.

Half of the 1,000 active 401(k) participants in Schwab’s survey are contributing 10 percent or less to their retirement plan, or an average of $8,788. Only 47 percent have increased their contributions in the past two years. One-third only contributes at their employer match level. About one in 10 are saving the rate at which they were defaulted into their plan.

Of those that were auto-enrolled in plans, one-third have never increased their contribution rate, and nearly half have never changed their investment selections.

About half of the respondents have used an online retirement income calculator, a healthy increase from past surveys, said Voris. Of those who did, half thereafter increased their 401(k) contributions.

“That stood out,” he said. “It’s a testament to what Schwab and others are doing—retirement calculators have come a long way, and that’s having a positive impact on participants.”

Schwab’s study is comparable to myriad other industry surveys in that it shows 401(k) savers want help. Twice as many participants said they would feel more comfortable making investment decisions with help from a professional as those that said they would be so on their own.

That instinct could be driving what Voris says is significant growth in managed accounts within Schwab plans.

Schwab partners with Morningstar’s managed account platform. For years, the automated discretionary platforms have come under fire for their cost. Voris says the value-add of managed account platforms can be realized when cost ranges between 25 and 40 basis points.

Under Schwab plans, all participants get a digital walk-through of Morningstar’s managed account platform, with the fee revealed up front. The platform then pulls real-time data to provide a sense of the personalized advice they would receive if they opt in. Most then choose to. Voris said 70 percent of Schwab participants opt for discretionary advice through the managed account platform.

“Our clients see the value in it,” he said. “Generally they have higher savings rates, higher satisfaction levels, and more confidence about the decisions they are making. The savings rate increase alone is a monumental difference.”

All in all, it’s been a great decade for 401(k)s and their participants. Sponsors are increasingly proactive, and that’s driving better offerings from providers, thinks Voris.

But as election season ratchets up, presidential candidates are bound to note the conundrum faced by millions of Americans who don’t have access to workplace retirement plans.

“The segment of the world we should hone in are those that don’t have access to a 401(k) that are actually employed,” said Voris. “You can solve for that in any way you like, through state or government solutions. But the tools are there for an employer to build a highly effective 401(k) that meets the needs of individuals. We have a lot of clients that have plans that are providing large amounts of retirement income.”


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