Art by Roman Klonek
Retirement plan advisers’ perspectives on investment and
recordkeeping providers are critical to their work for plan sponsor clients.
This year’s PLANADVISER Retirement Plan Adviser Survey, our eighth, provides
valuable insight into how your peers select providers and funds, as well as the
ones they rank highly.
On the investment side, performance is advisers’ utmost
concern, indicating that they put delivering a robust investment lineup ahead
of investment manager support, manager tenure, style drift and brand—even how
they and the plan are paid. The first criterion advisers turn to when selecting
a fund is its performance against benchmarks, with nearly half (47.5%) citing
this as the most important factor. The next measure of performance that
advisers look at is five-year returns, rated second by 30.3%, followed by
one-year returns, named third by 33.8%.
When asked to list their top five fund family
recommendations for plan sponsors, Vanguard came in overwhelmingly at No. 1
(56.9%), suggesting that its low fees and passive investment style are gaining
favor among advisers and their clients. The second most commonly recommended
fund family is American Funds (49.4%), followed by
T. Rowe Price (34.5%), J.P. Morgan (31.5%) and Fidelity (29.2%).
In terms of the individual mutual funds that advisers
recommend, PIMCO’s Total Return Fund dropped noticeably from No. 1 in 2013, 2012 and 2011 to seventh place, cited by only one-fifth of advisers.
As founder Bill Gross departed the firm before we conducted the survey, it will
be interesting to see whether PIMCO even makes the top 10 list next year.
Not surprisingly, in line with advisers’ fund family
preferences, Vanguard’s 500 Index Fund came in first, with 27.5% of the votes.
This was followed by American Funds Euro Pacific Growth (14.4%), T. Rowe Price
Target Date Funds (TDFs) (12.2%), J.P. Morgan SmartRetirement Target-Date Funds
(10.5%) and Vanguard Target Retirement (8.3%). As three of the top five are
target-date funds, that option’s increasing popularity is a noteworthy
development we will continue to track.
For the 11 supporting criteria that investment firms offer
advisers, Fidelity came in first five times, indicating that advisers view the
company as a defined contribution (DC) plan champion for its: supporting
materials, participant support, sponsor support, sponsor education materials
and participant education materials. The investment firm next most commonly
cited as a market leader in terms of support was J.P. Morgan, ranking as No. 1
for three sales-related criteria: adviser support/value-added services,
quarterly evaluation materials, and wholesalers. Vanguard was rated first for
its reputation and investment value for price, and American Funds was No. 1 for
its fund fact sheets.
On the recordkeeping side of the equation, the
two most important standards advisers consider when selecting a provider are
value for price (cited first by 35.5%) and fee structure for plan (ranked
second by 24.3%)—suggesting that recordkeeping is largely a commodity business.
However, the extra services recordkeepers add are evidently worth paying for,
according to responders, whom we challenged a step further by asking them to
evaluate recordkeepers in 18 different product and service areas, as well as
client segments. Fidelity Investments was rated first in seven of these
categories, Great-West Retirement Services topped six, and John Hancock
Retirement Plan Services came first in three.