More Sponsors Turning to Advisers

Even before the current market turmoil, plan sponsors were increasingly inclined to bring in some expert help.

According to PLANSPONSOR’s 2008 Defined Contribution Survey, nearly three-quarters (roughly 71%) of nearly 6,000 plan sponsor respondents said they were offering participants some kind of help with making investment decisions – a marked improvement from the 65% in 2007.

Much of that assistance is coming from the DC provider (nearly 32%), while financial planners/advisers outside the plan also represent a significant block (roughly 27%); both improved their representation from the 2007 findings (28.5% and 23.4%, respectively).

Sixty-one percent of plans surveyed relied on the assistance of a financial adviser, compared with just 55% a year ago (and 47% two years ago). Among plan sponsors choosing not to offer advice to participants, fiduciary concerns continue to dominate the rationale, though just 60% cited that factor this year compared with 66% a year ago. The other criteria—lack of interest from employees (25.1%), fees (25%), and lack of support from management (15.1%)—were largely unchanged in weighting from a year ago.

Investment Options

As for what they were offering help with, it is interesting to note that the average number of funds offered was down in this year’s survey—to 18.8 this year from 21.1 a year ago—though that was in line with the 18.1 offered in the 2006 results. On the other hand, the number of funds actually held by participants was unchanged at 5.2 (the median, by the way, was an even more modest 4.2, down from 5.0 in last year’s survey).
More employers reviewed their plan investment options quarterly (31.1%) than did so a year ago (28.4%), while slightly fewer did so on an annual basis than a year ago (37.5% compared with 40%). On the other hand, there was little change in the number of plans that had an investment committee in place to review those options, or in the composition of the committee. In this year’s survey, roughly 71.4% had one, compared with 71.8% a year ago. However, the number of plans with an “internal only’ committee dipped to 55.6% from 57% in 2007.
When it comes to evaluating their DC providers, only about one in four (29%) does so annually, though that is the most common frequency cited. The next most common response (nearly 23%) did so “every three to five years,” while about 15% did so every two to three years, and one in eight was on a one- to two-year cycle. Nearly 11% did so every five years (or more), and nearly one in 10 said they “never” formally evaluated the provider.
While there were signs of less contentment (see IMHO: Content Ed), the vast majority—86% of respondents—said that they would recommend their current provider to a colleague; while that was lower than the 89% of a year ago, the decline was relatively modest. One in 10 respondents to this year’s survey were not sure if they would recommend (up slightly from 8.3% a year ago), while 4.0% in this year’s survey said they would not, compared with 2.7% a year ago.
Survey Says
Each year PLANSPONSOR magazine asks plan sponsors to rate their current defined contribution services provider in a variety of categories. In order to qualify for rating in the survey, providers needed a minimum of 35 total client responses, and at least 15 client responses in any asset category to be rated in that category.
Quartiles for participant services and sponsor services were calculated in each asset category in which a provider qualified for a rating. The score for participant services in each provider’s listing comprises the cumulative average of 13 categories, and sponsor services comprises 10 categories (see Best in Class charts for the individual categories). The percentage score next to the quartile for each provider in each asset category represents the cumulative score out of 100%. For example, an average score of 6.82 out of a possible 7.00 for participant services in the small market would translate to 97.4%.
Best in Class providers can be found in each market segment as follows:
Or, you can find links to the providers you work with – or are thinking of working with HERE