The title of the cover story for the first print edition of PLANADVISER (PLANSPONSOR’s sister publication which first entered circulation a full decade ago) was the short but rather ominous phrase, “Now What?”

One would certainly be forgiven for assuming the article title referred to new fee disclosure requirements or even the early rumblings of the Department of Labor fiduciary rule, but it actually referred to President Bush signing the Pension Protection Act (PPA) of 2006. It may be tough to remember the sentiment, given the absolute boon to the defined contribution (DC) planning industry the auto-feature enshrined by the PPA has proven to be, but at the time a fair number of advisers were asking whether certain aspects of PPA could rob their business model of its traditional value.

In fact, for many of them, it did. Put simply, advisers were used to devoting a lot of time and resources into building investment menus, or convincing would-be participants to start investing, and then training them about the basics of risk mitigation and asset allocation—and overnight, PPA allowed much of this work to be wholly automated by recordkeepers and third-party administrators. 

“We know that in the last 10 years or so the advisory community has been quite successful in its effort to evolve, moving away from being pure investment experts to embrace the role of plan design consultant,” says Jordan Burgess, a long-time Fidelity executive who now oversees defined contribution investment only (DC) sales at Fidelity Institutional Asset Management. “They have not had much of a choice, and so today we still see advisers who are critically important to the success of retirement plans, but there is no denying they are engaged in different work than they used to do.”  

Citing his firm’s latest Plan Sponsor Attitudes Survey, Burgess says it’s no surprise advisers have remained relevant even in a world where employers can automatically sweep their employees into savings plans and even push them into professionally managed portfolios. “Advisers who are positioned for the future have moved well beyond the investment menu,” he explains. “They are proactive on plan performance, plan design consultation, managing fiduciary responsibility, minimizing and tracking costs. All of these things are very high on the list of demands from the plan sponsor post-PPA. It’s moved so far beyond just the investment menu.”

According to PLANADVISER’s own survey data, this shift in client demands and expectations has only increased adviser opportunity. In 2009, once all provisions of PPA had been implemented, 62.5% of all plans worked regularly with at least one adviser or consultant. Today the number is 71.7%, with some truly impressive growth figures for advisers in the less-than-$5 million markets. In fact, that statistic has risen considerably in just the past year, with 65.9% of small/micro plans working with an adviser in 2015 compared with in 2014 52.0%.

NEXT: Advisers have remained relevant post-PPA 

Burgess notes that, thanks in part to Department of Labor (DOL) rulemaking but also thanks to plan sponsors’ own desires and willingness to institute best practices, “the fiduciary element has evolved to become probably the most important aspect of this whole conversation.”

“In our polling, we find almost 40% of plan sponsors say addressing fiduciary exposure is their top concern in hiring an adviser, versus 24% last year,” Burgess says. “This is pretty amazing, and we feel it is no surprise that we now see 70% of advisers telling us they’re willing to embrace the fiduciary role, and that’s up strongly as well. It’s obviously a big finding.”

The great news for advisers is that satisfaction reached an all-time high this year in the Fidelity polling. More good news: advisers are perceived by the vast majority of clients, also at an all-time high, to be delivering significant value versus costs. Yet at the same time, the percentage of plan sponsors looking to switch advisers also stands at an all-time high.

“This series of facts is even more remarkable when we remember that back in 2013, the desire to change advisers was at its lowest point we have measured in this research series, with just 13% of sponsors we surveyed saying they were actively looking for a new adviser,” Burgess explains. “Now it’s jumped way back up to 23%, yet there is also this perception that advisers are doing a better job than ever. What the heck is going on here? One of our hypotheses is that, given all the litigation pressures and DOL’s work, sponsors want to be able to make sure they’ve done full due diligence on their adviser. They want to have the documented process and to be able to show on demand that they have crunched the numbers.”

Fidelity finds demand for advisers that know how to structure retirement income and make sense of the back-end of the retirement savings effort has grown in a significant way post-PPA. “This has been amazing to observe every year—because despite the desire to help people structure income, still to this day it’s only a minority of plans that actually have defined a retirement income goal for participation in their plan,” Burgess concludes.

NEXT: Looking ahead to 2026 

According to Anthony Domino, Jr., an experienced DC adviser with Associated Benefits Consultants, “in the last 10 years we have seen the 401(k) plan, from the perspective of the adviser, really evolve in the wake of the PPA and become these very nice, neat little machines that just chug away and generate new assets.”

In that sense, it is no longer the advisers’ job to make sure money goes in on a regular, automatic basis. 

“The adviser absolutely has to be delivering value elsewhere, and making sure the client grasps that value very clearly and knows what services are being paid for and delivered,” Domino says. “We absolutely have to reflect this new reality not just in our services but in how we charge fees and think about how clients pay us, and we absolutely have to be proactive as we do this.” 

At Domino's firm, for example, this plays out through a program that pre-schedules reviews of all clients’ fee structures as their assets get bigger, to ensure their fees remain reasonable and rational at all times, even as a plan grows strongly. Domino predicts this will be one of the determining trends, looking ahead to 2026 and the 20 year anniversary of PPA: There will be far more flat-fee and per-project work being marketed by advisers.

“This is a clear takeaway from the glut of rulemaking and litigation that have already occurred post-PPA—this is exactly the type of argumentation we see from the new 401(k) lawsuits,” Domino warns. “You have plans that have grown to billions in assets charging the exact same asset-based fee as they were paying when the plan was much smaller. The plaintiffs want to know, what additional value was being delivered for all this additional money being paid out by the plan? And if there was no additional value being extracted, why didn’t the fiduciaries pick up the ball and act to renegotiate fees? It’s that simple. The participants see their billion-dollar plan paying the same asset-based fee that an individual investor could get, and they get mad, as well they should.”