2017 PLANADVISER Retirement Plan Adviser Survey

The role of retirement plan adviser has evolved considerably in the past few years. Advisers are expected to provide assistance and guidance across all areas of the retirement plan—including with design and investments—and perhaps participant services as well.

Yet, while the job also varies from client to client, most relationships are, in part, founded on an expectation that the adviser will help the plan sponsor with its due diligence: to select and monitor the most appropriate investments and recordkeepers.

The 2017 PLANADVISER Retirement Plan Adviser Survey, our 11th, re-examines the factors that advisers consider when selecting these key providers, and details the companies they prefer. The next issue of PLANADVISER will include the second part of the survey, “Practice Benchmarking,” which delves into how advisers structure and run their practice.

Each year, performance remains top of mind for advisers when selecting investment managers. However, while it is often said that past performance does not indicate future results, advisers place a large emphasis on it when evaluating investments. Asked what their first criterion was when selecting an investment manager, 50.0% said it was how well the fund did against its appropriate benchmark. The second criterion, cited by 37.0% of advisers, was the average performance of a fund over the past five years. The third factor—again, performance-related—was the return of the fund over the past year, cited by 36.4% of advisers. The fourth consideration was style drift, cited by 38.3% of advisers.

Much has been made of the active vs. passive debate and what is best for retirement plans. As litigation and required disclosures continue to place an emphasis on investment fees, there is a growing focus on cost-effective investments and index funds. Thus, it is unsurprising to see that Vanguard is the No. 1 fund family and that retirement plan advisers made the Vanguard S&P 500 Index Fund their top fund to recommend to clients.

However, as we note in this issue’s Investment Focus piece (page 12), 85% of retirement plan assets are in actively managed funds, according to Strategic Insight Simfund data, which is why the rest of the Top 5 list of valued fund families—American Funds, T. Rowe Price, BlackRock and Fidelity—are all highly recognized active managers.

Assessing Recordkeepers
When it comes to selecting recordkeepers, value for price is clearly very important to plan advisers, as it received the most votes as the “first,” “second” and “first or second” consideration, being cited by 46%, 21% and 67% of advisers, respectively, among a total of 14 criteria they consider when selecting a recordkeeper. Other  such important criteria are the fee structure for the plan, cited by 25% of advisers, and the investment options available, cited by 10%.

Advisers were asked to rank both their perception of listed recordkeepers and how often they have worked with those recordkeepers. The providers that received the largest percentage of “very favorable” ratings were: Empower Retirement, Fidelity Investments, T. Rowe Price, Vanguard and Principal Financial Group. Still, it is worth noting that only Empower received a very favorable rating from more than half of the advisers scoring them—53%. The rest of the group most frequently worked with were John Hancock Retirement Plan Services, ADP Retirement Services and American Funds Distributors.

Methodology: This August and September, approximately 15,000 advisers were asked to respond to the 2017 PLANADVISER Retirement Plan Adviser Survey, developed by this magazine’s editorial and research teams. Survey questions pertained to the size and scope of advisers’ qualified plan business, practice management, compensation and client service, as well as their assessments of investment managers, mutual funds and defined contribution (DC) plan providers. At the close of the survey, 325 complete responses had been received from retirement plan advisers. To qualify to supply opinions on mutual fund families and specific mutual funds, an adviser had to be personally involved in evaluating and recommending fund choices in an advisory capacity to qualified plan clients; 212 advisers met this criterion. To evaluate DC plan providers, advisers had to answer affirmatively that, acting in an advisory role, they personally evaluate and recommend these providers for qualified plan clients; 205 advisers did so. In addition, an adviser needed to have worked with a DC plan provider more than once for his favorability rating of that recordkeeper to count. For more information and additional research available, please contact surveys@strategic-i.com.

Art by Red Nose Studio