Key Partners

Our cover story this issue, “Choosing Industry Favorites”, is the 2015 PLANADVISER Retirement Plan Adviser Survey, which indicates your favorite investment managers and recordkeepers, as well as what criteria you used to select those managers, funds and recordkeepers: performance, manager tenure, brand, value for price and fee structure for the plan. The survey also shows that advisers work with many recordkeepers, to capitalize on their unique strengths. It will give you an insightful look into how your peers select their partners and, perhaps, prompt you to consider different gauges when making these fundamental decisions.

For the many people familiar with the computerized advice model that has been available in 401(k) plans for quite some time, the growing presence of robo-advisers is expected to increase advice access through a more user-friendly interface with lower fees. Our article “Robo-Advisers” explores this and how the marketplace is developing. In the first six months of this year, assets overseen by robo-advisers grew by nearly 60% to more than $8 billion, according to Aite.

There is some concern in Washington, D.C., that the Securities and Exchange Commission (SEC)’s money market reforms are attracting too little attention from plan sponsors. If your clients are coming to you, trying to determine whether they have to replace their current retail money market funds with institutional prime funds or government-sponsored funds, read this issue’s Capitol News. The money market fund rulemaking considers defined contribution (DC) retirement plans to be collections of natural persons, which means that most of these plans will be able to continue investing in retail money market funds.

Over the years, we’ve gotten to know many advisers who work with family, as parents bring their children into the fold. In “A Family Affair”, we’ve interviewed six parent and child adviser teams. The main advantages that all cited were trust, mutual respect, honesty and a single-minded focus on clients. It also appears that clients feel very comfortable when served by two members of a family, viewing both advisers as true equals. Having a younger generation’s new insights combined with the veterans’ experience and expertise is also a great benefit, these teams say. Members of the older generation all report that their offspring have exceeded their expectations and are embraced with great admiration by their clients. Plus, it solves the succession planning question and clearly informs clients that the practice will remain intact and continue to serve them seamlessly over time.

Have you led your clients down the current trend of trimming investment menus and using a target-date fund (TDF) as the qualified default investment alternative (QDIA)? Many advisers are determining, with input from their clients, what makes the right investment menu, as discussed in “Simplified, Streamlined”. Plans are also moving toward a three-tiered approach, with the QDIA as the first tier, utilizing a target-date fund, a balanced fund or a managed account. The second tier is a core menu of, typically, 10 options, ideally covering all of the broad equity and fixed-income asset classes through multi-manager portfolios or funds-of-funds. Tier three is usually a brokerage window or perhaps a more aggressively individualized or higher-price managed account service. Especially in light of recent court cases, it is critical for advisers to fastidiously monitor the investment menu—its performance and costs. Advisers also need to ensure that the plan is using reasonably priced share classes.

Have you protected your business in all the right ways? In “The Right Protection”,  we examine what kinds of insurance retirement plan sponsors and advisers need, starting with the Employee Retirement Income Security Act (ERISA) bond. This Practice Management story also covers fiduciary liability policies, which offer a key provision of advance defense costs, as well as errors and omissions (E&O) coverage. Along with liability associated with malfeasance, fraud or negligence, another potential gaping hole that plan sponsors and advisers need to be aware of is network security risks and breaches. These can be protected with cyber security insurance policies.

As always, we hope this issue helps you improve your practice and do an even more remarkable job of serving your plan sponsor clients and of helping participants prepare adequately for a successful retirement.

A Look at Balances

Workers at law firms have the highest average account balances—$186,176—according to the 2014 PLANSPONSOR Defined Contribution (DC) Survey, as we note in this issue’s Data Points. This group is followed by employees at utilities ($129,703), accounting firms ($120,216), Fortune 1000 companies ($111,550), and research and development companies ($110,071). Participation in 401(k) plans is highest among labor unions, with 89.1% of their members enrolled in the retirement plan; next is participation at credit unions (87.9%), pharmaceuticals (86.3%), utilities (86.3%) and accounting firms (86.2%).