Sponsor Perceptions of Retirement Plan Services - Key Findings

Sponsors’ Goals and Challenges

Compliance with regulations is the most important challenge for both sponsors and advisors. Sponsors and advisors agree that educating participants, increasing plan participation and growing savings are important, but sponsors see them as less important than advisors do. Both sponsors and advisors cite reducing plan fees and expenses as a key challenge.

Services Advisors Currently Provide

Plan sponsors and advisors share consistent views on key elements of support offered, such as investment selection and monitoring, general information, participant enrollment and ongoing education. They are not in sync, however, on certain elements:

  • Advisor’s role as an investment fiduciary
  • Perception of needs for additional support, such as meeting compliance burdens
  • Criteria for selecting an advisor to work with a plan
  • Discussion and consideration of plan features and QDIA support

Investment Selection and Monitoring

The majority of sponsors and advisors agree that offering a tiered investment menu — target date funds, core funds and a brokerage/mutual fund window — for different types of plan participants can result in better investing. Investment performance is the leading factor driving change of plan investment options, followed by the availability of lower cost options. Sponsors and advisors closely agree that participants are best served by investing in target date funds rather than by selecting individual funds or plan choices. Sponsors are more likely to rate their involvement with investment selection higher than advisors perceive. Sponsors also want more frequent review than the annual meetings that advisors typically offer. Nearly three-fourths want at least semiannual reviews, and half want quarterly reviews.

Compliance and Fiduciary Responsibility

The key regulatory concern for sponsors is ensuring reasonable plan fees and expenses, followed by complying with Department of Labor (DOL) fiduciary standards. Emerging advisors believe sponsors have greater concern with safe harbor testing. Heavy focused advisors are more likely to perceive sponsors are concerned with fee disclosures, potential class action lawsuits and payroll deductions.

Advisors believe they are effective in controlling plan costs and that fee disclosures are easy to understand. Sponsors may not understand plan compensation as clearly as advisors believe they do. Sponsors tend to focus on absolute cost, which suggests they may be missing the point of DOL guidance on seeking value for the fees they pay.

Participant Support

Helping plan participants become retirement ready is an important concern for sponsors, but they place less emphasis on participant education, enrollment, communications and savings rates than advisors do. Nearly half of advisors say participants are poorly prepared for retirement, whereas only one in six plan sponsors shares that view. This represents an opportunity for advisors to add value by educating sponsors on retirement readiness. Read the full white paper now.