Two-thirds (65%) of respondents currently use a 3(21) investment adviser, and 9% do not use an investment adviser at all.
Of the poll participants who said they are not currently using a fiduciary manager, 29% said they would likely consider a change to this model within the next five years, potentially more than doubling the use of an outsourced fiduciary manager model by corporate pension plan sponsors by 2017.
According to the Employee Retirement Income Security Act (ERISA), an investment provider who assumes discretion is considered to be a 3(38) fiduciary manager. Other industry names for this model include investment outsourcing provider and outsourced chief investment officer (OCIO). In contrast, an investment provider who delivers advice only is considered to be an ERISA 3(21) investment adviser. An example of this model would be a traditional investment consultant.
Poll participants currently using a 3(38) fiduciary
manager said this model allows them to focus more on strategic issues,
such as aligning investment decisions with corporate financial goals,
and delegate tactical decisions, such as improving portfolio
The top three strategic priorities identified by plan sponsors working with a fiduciary manager included developing new solutions to better control funded status volatility (82%); mitigating the potential impact of plan contributions on corporate finances (45%); and formulating a plan glide path with automatic triggers to capitalize on market swings and protect funded status (36%).
With a continued low interest rate environment, the majority (55%) of poll participants currently using a 3(21) investment adviser also identified the need to develop new solutions to better control funded status volatility as the top priority in working with their investment advisers this year.
Poll participants currently using an investment adviser identified a few top investment management priorities that differed from those currently working with an outsourced fiduciary manager. More than one third (36%) of poll participants indicated the need for a process that allows them to execute faster on market changes. However, when asked their top reason for using an investment adviser, the majority (73%) of poll participants said they currently use this model even though they already have dedicated internal staff in place. This shows that many plan sponsors may have the staff, but still lack the capability of executing on market changes in a timely and effective way.
Additionally, more than one-quarter (27%) said increasing the level and frequency of comprehensive strategic advice is a top priority for better plan management this year.
Poll participants using an investment adviser said a loss of control in selecting managers is the main concern for their reluctance to use a fiduciary manager at this time.Complete poll results can be obtained by e-mailing firstname.lastname@example.org.