Small Plans Seeking Help of Advisers

Fifty-two percent of small retirement plans, those with less than $50 million in assets, that currently do not have an adviser are either looking for one or considering doing so, according to David Swallow, senior director of institutional relationships at TIAA in New York.

TIAA survey data also indicates that the top reasons why these small plan sponsors are looking for an adviser are to get help with the investment lineup, to provide participant education and to give guidance on fiduciary responsibilities, Swallow says.

The plan survey found that sponsors with an adviser feel more confident about meeting their fiduciary responsibilities (85% versus 80% of plans without an adviser), that their plan’s fees are fair and competitive (79% versus 57%) and that their employees are saving adequately (40% versus 8%).

On the flip side, Swallow says, a TIAA survey of retirement plan advisers found the areas that they thought they provided the most important support were participant enrollment; fiduciary and compliance support; and plan pricing, review and analysis.

Aaron Friedman, national practice leader, tax-exempt, at Principal in West Palm Beach, Florida, says “small and mid-sized plans are very much in need of advisers because they don’t have dedicated human resources personnel or expertise on plan administration. Lending them that expertise can expose them to best practices and current trends.”

For example, Friedman says, while fee levelization might not be the right fit for every plan, a recent survey by the Plan Sponsor Council of America of nonprofit plan sponsors found that 90% of large plans are familiar with fee levelization, but a mere 20% of small plans are. That same survey found that 40% of small plans use investments from a single provider “and have no vigorous process to monitor those investments. This is a particular need that advisers can address,” he says.

Advisers should be aware that many small plan sponsors do not think they are large enough to interest an adviser, he continues. “We know this is not true. There are many advisers who specialize in small plans, and they need to help sponsors overcome this misconception.”