If a survey was conducted of advisors inquiring about their favorite clients, it’d be reasonable to assume that the most prominent response would be something along the lines of the clients that come in the door with the most assets.
Yes, it’s always nice when well-heeled clients sign on with advisors, but not all prospects are high or ultra-high-net-worth. However, there’s another group of clients advisors are likely enthusiastic to interact with: those that engaged, proactive and take seriously the planning needed to realize long-term objectives such as sound retirement savings.
Regarding clients increasing affinity for financial education, professional advice and taking more active stakes in their financial goals, there’s positive news on the retirement front and that’s good news for advisors. Think about it this way: advisors and clients are constantly hearing about the U. S. retirement crisis and the rising dollar amount clients believe they’ll need to comfortably exit the workforce.
Data indicate folks that are still working have gotten that message and they’re committed to boosting their retirement savings. Alone, that’s an obvious step in the right direction, but it’s also good news for advisors because it means clients don’t need to be cajoled into the retirement planning conversation. Rather, they’re ready and willing to have it, implying the talk starts from a constructive, positive place.
Employer-Sponsored Plans Loom Large
Employer-sponsored retirement plans, including 401(k)s, figure prominently in the retirement planning scenario and data confirm workers are increasingly capitalizing on those offerings. Vanguard’s “How America Saves 2025” survey sheds light on workers’ increasing commitment to leveraging workplace retirement plans.
Examining participation rates in workplace retirement plans offered by Vanguard, the asset manager notes the 2024 plan-weighted participation rate was 85%, up from 81% in 2015. The participant-weighted participation rate, another gauge of the extent to which employees are using Vanguard-administered retirement plans, reached 82% last year, up from 78% in 2015. Importantly, it’s not just participation rates that are rising. Rate of savings is increasing, too.
“The average deferral rate was 7. 7% in 2024, an all-time high. The median deferral rate was 6. 8%,” according to Vanguard. “Sixteen percent of participants increased their payroll deferral percentage (8% decreased it), while an additional 29% saw their deferral rate increase via an automatic increase feature—that’s a boost in saving rates for nearly half (45%) of all participants. ”
Something for advisors to note: participation rates in employer-sponsored plans with automatic enrollment are significantly higher than those with voluntary options. With that in mind, advisors should ask clients if their 401(k)s are automatic or voluntary and if it’s the latter, encourage those clients to start contributing to those plans as soon as possible.
Advice Wanted
There was a time when 401(k)s and the like were largely viewed as set-it-and-forget-it assets. Pick a domestic large-cap equity fund, allocate a smaller amount to a comparable international equity strategy and sprinkle in an aggregate bond fund and workers go on their merry way.
That time has passed and with clients and workers increasingly having at least foundational knowledge about investing, more want advice about how to properly allocate within the confines of employer-sponsored retirement plans. However, many have yet to tap into that advice implying there’s significant runway for advisors to add value here.
“For their participants who need help with investing and planning decisions, plan sponsors are increasingly offering managed account advice services,” adds Vanguard. “Forty-five percent of Vanguard DC plans offered such services in 2024, including 8 in 10 larger plans. Nine percent of participants used a managed account advice service if offered. ”
