Record Number of Plan Sponsors Eye an Adviser Switch

Fidelity Investments announced the results of its eighth annual Plan Sponsor Attitudes survey, which revealed that a sizable majority of plan sponsors (65%) are highly satisfied with their plan advisers.

However, similar to the last several editions of the survey, Fidelity reports that a record number of plan sponsors are actively looking to switch their plan advisers. Nearly four in 10 (38%) sponsors suggest they are actively looking for a new adviser, up from 30% last year. The ongoing study, which began in 2008, surveys employers who offer retirement plans that use a wide variety of recordkeepers and have at least 25 participants and $10 million in plan assets.

Even with the strong marks from sponsor clients, Jordan Burgess, head of specialist field sales overseeing defined contribution investment only sales at Fidelity Institutional Asset Management, warns that this is not the time for advisers to lay back and rest on their accomplishments.

“While most plan sponsors remain satisfied with their advisers, they are raising their expectations,” he explains. “For some advisers, this could put their business at risk. For others, this could be an opportunity to win new clients.”

Burgess says the data is clear: “Successful plan advisers are those who are aware of their dual mandate to help plan participants achieve their retirement outcomes and to support plan sponsors with the challenges associated with offering a defined contribution plan and other employee benefits.”

Other findings show “reducing business costs related to having a plan” is the top concern for plan sponsors, with 31% citing it as an area of focus. Other important themes for plan sponsors include managing their fiduciary responsibility (23%), preparing employees for retirement (22%) and the risk of litigation and liability (18%).

Not enough hours in the work day 

The Fidelity research highlights the competing priorities and challenges employers face when allocating time, budget and resources to providing benefits to their employees.

“In terms of overall benefits, the plan sponsors surveyed report that health care ranks No. 1, before retirement benefits in order of importance,” Burgess confirms. “Two-thirds of the plan sponsors surveyed agree that increased health care costs have resulted in reduced spending on other benefits, an increase from 64% in 2016 and 60% in 2015.”

While advisers have to remain on their toes to keep their clients happy, the study shows that plan sponsors are making more plan design changes than ever before and are eagerly engaging with advisers to do so. Plan design activity continues to increase and reached a new high at 92%, with plan advisers seen as the primary influencer of these changes. Importantly, 79% of plan sponsors reported that participants were satisfied with the changes made recently to their plans.

“Auto-enrollment, which can improve participation rates from an average of 50% to 86%, according to our data, continues to be the most popular change, with 42% of the plan sponsors surveyed having introduced the feature in the past two years,” Burgess adds. “More than two-thirds of the respondents said their participants were satisfied with auto-enrollment.”

Other key findings show about six in 10 plan sponsors feel that a quarter or more of their workers leave the workforce early due to reasons beyond their control. “Given these considerations, advisers could help sponsors consider the impact early or late retirement can have on their business and identify tactics to improve plan participant savings rates,” Burgess concludes