Large 401(k) Sponsors Want Expert Advisers

April 17, 2008 ( - A new Spectrem Group survey of large 401(k) plan sponsors found that the sponsors are looking for advisers with expertise in a particular service and will bring on more than one if they need to.

The Spectrem report about the online/phone poll of 150 plan sponsors with 1,000 or more employees taken earlier this year said that might mean a sponsor might hire an investment consultant (including one familiar with a particular asset class) as well as a separate adviser with administrative expertise.

Nearly nine in 10 of the large plan sponsors said they have used an outside adviser in making plan decisions. “As plan size increases, sponsors find it necessary to use the services of more than one individual/firm to advise on the retirement plan,” Spectrum researchers wrote. “This is to be expected since as a plan gets in size, is more likely to purchase services on an unbundled basis.”

Two-third of plans relying on a single adviser use one affiliated with their plan provider, the study found. Among those using non-affiliated advisers, Spectrem said, nearly half use a fee-paid employee benefit consultant, with the remainder equally split between TPAs, fee-paid investment consultants, and brokers/financial planners.

Nearly three-quarters of all large plan sponsors rely on their advisers to examine their investment performance as well as monitor the plan to ensure it complies with all regulations. About six in 10 sponsors look to their advisers to provide investment education, and a similar number are looking for their adviser to provide one-on-one advice.

Some 43%, of plan sponsors report that their adviser meets with them on a quarterly basis to provide an in-depth review of the plan. One third had an as-needed meeting, with the remaining sponsors saying that they meet with their adviser annually.

When asked what advisers serving large plans could do better, sponsors mentioned, among other things, that advisers need to be more proactive and attentive to the sponsor client’s needs.

“Some sponsors may have difficulty in bringing up unpleasant topics such as breakdowns in service, thus, advisers and plan providers should regularly request feedback on the level of service that the sponsors are receiving and do what is necessary to bring to light any problems and rectify them,” the report said.

The study also found large plan sponsors have quickly embraced and implemented the automatic enrollment and investment advice features made possible by the Pension Protection Act.

Spectrem noted that few new plans are introduced at the top end of the market and that providers have to fight for a piece of the 10% of plans that switch providers each year.