Fidelity: About 1 in 5 Plan Sponsors Seeking New Retirement Adviser

One in five plan sponsors (22%) reported they were actively looking to switch advisers, with motivations including more service offerings and better participant communication and education, according to the 14^th Fidelity Plan Sponsor Attitudes Study.

Among plan sponsors looking to switch advisers, 38% said they were searching for an adviser who provided more extensive services, followed closely by 36% interested in an adviser who was better at tacking servicing issues, and 34% seeking someone with more effective employee communication and education options.

The results come amid continued consolidation in the retirement plan advisory space by aggregators. That shift in the market also showed up in the survey responses, with 35% of those plan sponsors looking to shift advisers noting they are doing so for external factors or benchmarking purposes. 43% of that subset noted that their adviser’s company went through a merger or acquisition, and 38% reported the adviser either retired or left the business.

“While we see the relationships between plan sponsors and plan advisers evolving, employee communication and education remains at the forefront, with sponsors looking to advisers to offer a more holistic experience,” Liz Pathe, head of defined contribution investment only sales at Fidelity Institutional, said in a statement. “With plan designs, investment lineups, and the benefits landscape all evolving, advisers have an opportunity to showcase their impact and service-centered mindset.”

Plan Sponsor Expectations

The survey of 1,351 plan sponsors did show that the majority of respondents are happy with their adviser’s services, with 76% reporting being extremely satisfied. That will likely bode well for advisers in terms of continued work with their clients, as a whopping 95% of respondents expect to make plan design adjustments in the remainder of this year.

Those changes include increasing the matching contribution (26%), increasing the quota-enrollment deferral rate (26%), and beginning to offer an income replacement fund (26%).

The primary focus of most plan sponsors (94%) working with an adviser is employee education and plan improvement, according to Fidelity. The research also revealed plan sponsors value improved participant outcomes (44%) over any other service offered by their plan adviser. Other notable drivers of value were time spent on plan and administrative support (43%) and providing objectivity when making plan choices (41%).

Investment Menu

Investment menu changes continue to be on the rise, according to the recordkeeper. Plan sponsors said the most notable enhancements in the last two years were an increased number of investment options (30%), rise of collective investment trusts (29%), and offering CITs for the first time (28%).

From 2018 to 2023, the percentage of sponsors starting to provide CITs saw a 10% annual growth rate. Twenty-nine percent of respondents were thinking about offering CITs for the first time. Additionally, 28% considered increasing the number of CITs and index funds offered.

“We’re seeing an increase in small plans preferring advisers to have autonomy when managing investments and overall design,” said Pathe in the statement. “In an evolving investment landscape, it’s not surprising to see sponsors lean on adviser expertise to strengthen overall knowledge and make modifications to product lineups.”

Fidelity conducted the online Plan Sponsor Attitudes Study in March 2023, the 2023 Plan Sponsor Attitudes Study was an online survey of 1,351 plan sponsors on behalf of Fidelity. Fidelity Investments was not identified as the survey sponsor.