Strong Value Propositions Biggest Trend among Advisers

Through a national “listening tour," Transamerica Retirement Services has identified the most common trends among financial advisers in the retirement industry.

Some of the top trends facing plan advisers of small and mid-sized company-sponsored retirement plans include:

1.  Strengthening their value propositions.  “Advisers are underscoring the value they can add to a plan in a number of ways; helping with plan design and aligning it with plan performance; helping drive people into the plan and engaging with them; and from the fiduciary perspective, helping sponsors monitor and if necessary replace investments in the plan line-up,” said Jason Crane, senior vice president and national sales director for Transamerica to PLANADVISER.  “The #1 driver of satisfaction of sponsors isn’t performance of the investments, it’s participant engagement,” he added. Additionally, advisers should be able to cover all of their clients’ needs, from design consulting to administrative needs. Either they can do everything themselves, Crane said, or they should be able to recognize when third-party expertise is necessary.

2.  Genuinely improving plan design. Crane said while auto-enrollment continues to gain momentum among plan sponsors, the industry is making a mistake by allowing plan sponsors to design their plans with a 3% automatic deferral rate. “Objectively speaking, if vendors or advisers look at retirement readiness, 3% will lead to a poorly positioned retirement for participants,” he said. Advisers want to be able to show benchmarks to sponsors that prove that 3% is not enough, and the auto-deferral rate should be 6%. Crane added that providers can help with this, noting that Transamerica incentivizes sponsors by using a pricing model that encourages stronger plan design. “The pricing model is driven by the flow into the plan annually, to inspire sponsors to construct their plan in a way that is beneficial to themselves and the participants.”

3. Increasing plan evaluation and documentation.  While benchmarking itself is not a new concept, Crane said advisers are doing more tracking, documenting and storing of plan materials than before. This again helps them underscore their value by pointing to how their services helped the plan succeed. Many advisers are providing their plan sponsor clients with an annual check-up of key plan metrics such as participation rates, deferral rates, average account balances, plan fees, and match, vesting and loan provisions. Annual benchmarking of these metrics can help identify strategies to improve the plan.

4. Redefining their role as fiduciary. Plan advisers may redefine their fiduciary status in advance of potential regulatory changes. In 2012, the U.S. Department of Labor is expected to re-propose its rule on the definition of "fiduciary" for retirement plans. Regardless of if or when this rule is formalized, advisers are currently in the process of deciding whether or not they are comfortable or allowed to acknowledge fiduciary status. The advisers who will not act as fiduciaries will most likely seek the support of a third-party fiduciary service.

"We found that retirement plan advisers remain focused on increasing client satisfaction and on guiding their clients through market volatility and upcoming regulatory changes. Most of all, plan advisers confirmed that they require flexibility from retirement plan providers to meet their clients' needs in this ever-changing environment," concluded Crane.