Fund Scandals Fail to Stir Most

December 6, 2004 ( - This year, of course, has been more than usually trying for plan sponsors but, for the industry overall, the heightened awareness and attention paid to fiduciary concerns is seen by most as a good, if stressful, turn of events.

That heightened awareness also is borne out in a telling statistic among the participants in PLANSPONSOR’s eighth annual defined contribution services survey. A record number (nearly 75%) of a record number (roughly 4,000 plan sponsor respondents) now have a written investment policy statement to guide their efforts. Larger plans continue to be more likely to have these than smaller programs but, incredibly, one in five of the largest plan respondents, those with more than $200 million in assets, apparently does not yet have one.

That statistic is particularly telling in times such as the year just past when events like the mutual fund trading scandal provide a unique impetus to reassess the actions appropriate to a process of prudence in evaluating plan options. Still, it will be surprising to some to discover that the trading scandal has failed to push hordes of DC plans to the warm embrace of a nontainted provider. In fact, more than half the respondents to this year’s survey, some 51%, said they had made no changes to investment policy, the way their plan chose funds, or the process for monitoring fund performance.

Even among those that made changes, the shift was largely toward information requests and heightened scrutiny, not provider terminations.

Roughly a quarter had increased their oversight, for example, while a comparable number had sought the recommendation of either their advisor or provider on the matter. Less than 5% chose to select a new provider or a new advisor as a result of the trading scandal.

About one in eight had increased the information provided to participants, while a nearly identical number had increased fund options.