Beyond the particulars of participant-level advice, nearly two-thirds of plan sponsor respondents—and nearly half of even the largest programs—now rely on the services of a financial adviser. Larger programs, notably those in the large and mega segments, were significantly more likely to claim that their adviser’s fee arrangement was based on a flat fee/retainer (61% and 60%, respectively), while micro and small plans were more inclined to cite adviser fees based on plan assets (54.2%, and 59.6%, respectively). Mid-size plans were split nearly evenly between those two options in the arrangements they had in place. Significantly, there was movement in every market segment away from fees based on plan assets and toward some form of flat-fee arrangement.
When it comes to evaluating their advisers, plan sponsors put the highest priority on service to the plan committee/sponsor over plan participants, a finding consistent with prior years. In fact, industry knowledge (doubtless to be deployed in the service of the committee/sponsor) outpaced participant service. Transparency of fees was ranked below service to plan participants, but it moved up sharply in priority from a year earlier—and it was well ahead of reasonableness of fees.
Asked how often they formally evaluated their DC provider, larger programs were again this year noticeably less likely to say they did so on an annual basis. In fact, for mid-size and large programs, they were about twice as likely to undertake that review every three to five years, a frequency that also was most commonly cited by the largest programs. Those review timelines help explain why more than half of this year’s respondents in the mid-size, large, and “mega” categories had been with their current DC provider more than seven years—and why, even in the micro segment, a full third had a relationship that was more than seven years old as well.
However, if a full-service review was something of an infrequent event, not so fees. More than half of this year’s survey respondents said they review fees annually; and the larger the program, the more likely to conduct that annual review. That finding was, however, down slightly from a year ago.
As for the elements of that provider review, overall participant servicing remained top of mind for plan sponsor respondents, a sentiment that intensified as the programs grew in size. Overall sponsor servicing was second most important, with the quality of the client service team not far behind, and cost/fees just behind that.