2013 Adviser Value Survey

Adviser-run plans excel in design, reviews and customizatio

By Alison Cooke Mintzer See Archive >
2013 Adviser Value Survey

2013 Adviser Value Survey: Without question, advisers bring extensive expertise in designing, running, analyzing and tailoring defined contribution (DC) plans, as shown across the board in this year’s survey of 7,000 plans nationwide by PLANADVISER’s sister publication, PLANSPONSOR.

Sophistication and Customization

Plans that use advisers are more likely to employ advanced and emerging plan provisions, such as a Roth contribution (50.1% of plans that use advisers have this feature compared with 43.9% of plans that do not use them), automatic enrollment (63.8% of plans with $1 billion or more assets with advisers compared with 52.0% of plans without advisers) and catch-up contributions for employees ages 50 and older (97.4% of adviser-serviced plans vs. 96.5% of plans not adviser-serviced). Adviser-run plans are also more likely to offer a health savings account and a 529 college savings plan (55.1% vs. 53.6%, and 16.1% vs. 10.5%, respectively).

Plans with an adviser at the helm are more apt to select as their qualified default investment option (QDIA) a custom target-date fund (TDF), a risk-based lifestyle fund or a professionally managed account. In fact, advisers are far more prone to offer customized TDF series in their plans (13.4% of adviser-run plans vs. 10.1% of those not adviser-run). Among plans in the $50 million to $200 million range, the disparity in these figures jumps significantly to 18.1% among plans with an adviser compared with 7.2% of plans without.

Higher Deferral Rates

While the most common default deferral rate continues to be 3% or 4% of compensation regardless of whether a plan is serviced by an adviser or not, it is clear that advisers are pushing plans to increase the deferral rate to 6% or higher. This 6% is most statistically pronounced among plans in the $50 million to $200 million range (12.1% of plans with advisers default their participants at this level as opposed to 6.1% of those without).

While automatic escalation is certainly an emerging trend among defined contribution plans, it is advisers who are most noticeably bringing it to the table, especially in plans in the $200 million to $1 billion range (47.5% of plans in this range with an adviser automatically escalate their participants compared with 38.3% in plans without one).