In Practice December 26, 2019

More Advisers Look for Co-Fiduciary Support from their B/Ds

A look at the results of the PLANADVISER Practice Benchmarking Survey between 2011 and 2019, showing some areas of significant evolution in the way advisers build and run their practices. 

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An analysis of our annual PLANADVISER Practice Benchmarking Survey over the past eight years shows considerable changes in the ways that retirement plan advisers run their practices.

Most notably, advisers have moved away from independent broker/dealers and gravitated more to national wirehouses. In 2011, 18% of advisers were with a national wirehouse and 32% with an independent broker/dealer. In 2019, 25% of advisers are with a national wirehouse, and only 9% are with an independent broker/dealer.  Also, more retirement plan advisers have become registered investment advisers. RIAs numbered 19% of the universe in 2011 and have grown to 39% this year.

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In addition, more advisers are dual-registered. This was the case for 15% of advisers in 2019 but 22% in 2019.

As to the primary benefits advisers receive from their broker/dealers (B/Ds), it is clear that their support has become more important to advisers. Compliance oversight is still the No. 1 item, and it has only risen in importance, from 71% in 2011 to 91% in 2019. We did not ask about technology and IT support in 2011, but it appears as advisers’ second most-appreciated service from their broker/dealers in 2019, cited by 63% of advisers.

Co-fiduciary support has become much more important to advisers, rising substantially from 31% in 2011 to 63% in 2019. Investment due diligence has also ticked upwards, from 44% to 61%, as has marketing support (28% rising to 59%). We also asked advisers this year about wealth management support, with 61% saying this is a primary benefit they receive from their broker/dealers.

We expanded the number of B/D services that we ask advisers about since we first issued the survey and found that advisers also value participant education materials and support (59%), retirement plan expertise (54%), retirement income projection tools, (41%) retirement plan searches (41%) and lead generation and referrals (26%).

The way that advisers prospect for new clients has remained largely the same, however. The most common way that advisers find new clients remains referrals from other professionals (57% and 53%), followed by referrals from existing clients (24% and 40%).

In 2019, 80% of advisers have a written business plan that governs their practice. Eighty percent provide individual advice or wealth services to plan participants. Thirty-six percent offer health savings account (HSA) consulting services, and 47% are planning to do so—for a combined total of 83%.

The three most common ways that advisers disclose their fees to their plan sponsor clients are through the contract, annual reviews and 408(b)(2) disclosure statements. The three most common ways that advisers are paid for their qualified plan business are through flat fees (91%), fees based on assets (89%) and through an Employee Retirement Income Security Act (ERISA) budget or ERISA reimbursements (57%).

The three biggest allocations of their revenue are to adviser salaries (37%), B/D services (14%) and staff salaries (14%).

The 2019 survey also asked advises about the primary benefits they receive from their custodians. They are the trading platform (48%), online access to trust reporting (31%), robust trust and trading reports (18%), plan distribution processing to plans (17%) and retirement specialists (14%).

The survey also asked advisers what technology solutions they use. Ninety-three percent use customer relationship management (CRM) platforms, 87% portfolio management tools or systems, 71% cloud-based document storage systems and 70% financial planning software.

Advisers use a wide range of criteria to measure the success of the plans they oversee, but the No. 1 factor is participation rates (92%), followed by deferral rates (90%) external benchmarking of plan design (70%), the percentage of participants with appropriate asset allocations (65%) and the percentage of participants meeting retirement income replacement ratio goals (63%).

Client Service December 20, 2019

Broad Benefit Trends to Watch in 2020

Employers are accustomed to having five generations in the workforce, but they now need to focus on the new expectations Gen Z brings to the workplace, Fidelity says.

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To mark the end of the year, Fidelity gathered survey feedback from employers across a variety of industries, asking about their ambitions for expanding benefits in 2020.

According to Fidelity, an organization’s benefits platform is one of its most effective tools for attracting and retaining top talent, especially in today’s competitive job market.

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The firm’s leadership says clients have indicated they are facing increasing pressure to improve and evolve their organization’s benefits, so it has become more important than ever for retirement plan providers and advisers to work closely with them to identify and provide the right combination of benefits that will increase employee engagement and have the greatest impact on their workforce.

Based on direct feedback from a diverse set of employers, Fidelity named six top benefit trends for 2020 and beyond, starting with “making way for Generation Z.”

“Employers are accustomed to having five generations in the workforce, but they now need to focus on the new expectations Gen Z brings to the workplace,” Fidelity says. “Employers will be tasked with providing benefits that reflect greater social responsibility, such as charitable giving and volunteer programs; more flexible work schedules and workspaces; environmental, social and governance (ESG) products within their retirement plan; student loan repayment assistance; and a corporate focus on creating a diverse and inclusive workforce.”

The second theme is that plan sponsors are extending financial and physical wellness programs to global workforces, while increasing support for mental health and substance abuse.

“Building on the increasing popularity of wellness programs in the U.S., employers with a multinational workforce are looking to develop a consistent benefits approach for their employees around the globe,” Fidelity explains. “Our research found that more than half (56%) of employers surveyed offer well-being programs to employees globally, and another 14% are considering extending their well-being program to workers in multiple geographies in 2020. In addition, employers are expanding health care benefits to include greater access to programs and resources to support employees (and their families) with mental health and substance abuse issues, including anxiety, mood disorders and trauma-related disorders (such as PTSD).”

Third, employers are providing more help with the decumulation phase of retirement savings. Fidelity says more than half (55%) of retirees kept their 401(k) saving with their previous employer when they retired, so more employers are providing tools and guidance to help workers shift from “accumulation” to “decumulation” and transition retirement savings into a durable income stream.

Fourth, employers are expanding benefits for family caregivers.

“Research shows there are more than 40 million unpaid caregivers in the U.S., and employers are recognizing how providing care to a family member can impact their ability to perform at work,” Fidelity says. “Employers are considering a range of options to help family caregivers, including more flexible work schedules, childcare assistance, paid family leave and access to services to assist with their caregiving activities.”

The fourth theme identified by Fidelity is that employers are making company stock available to a broader population of employees via stock plans, not just senior executives. This is because company stock continues to be viewed as a top workplace benefit, and employers are increasingly viewing company stock plans as a tool to attract and retain talent, as well as boost morale and productivity.

“More employers are considering adding an employee stock purchase plan to their benefits offering and providing access to company stock to a broader group of employees, without having to dip into the pool of shares earmarked for long-term incentives,” Fidelity explains.

Finally, Fidelity says, the sixth theme is an increasing focus on personalization, utilization and optimization of employee benefits.

“Employers will continue identify their employees’ top benefit needs to provide a tailored, personalized experience for each employee,” the firm explains. “However, employers are also going to increase their focus on benefits utilization to justify a particular benefit’s availability, as well as benefits optimization where they are utilizing the right mix of available benefits to address their specific need.”

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