The report, titled “What Type of Financial Advisor is Right for My Plan?,” contends “formal RFP searches have been firmly embraced by plan sponsors and are now the standard method for selecting a professional retirement plan adviser in many segments of the employer population.” The research was conducted by EACH Enterprise LLC for the RAC and was based on focus group discussions with 14 plan sponsors from around the country who partner with a professional retirement plan adviser.
“We are seeing a noticeable increase in adviser RFPs in the industry, and we believe this will continue to increase. Our experience tells us we are seeing the increase due to several things. First, the recent introduction of fee disclosure regulations has added complexity to managing a retirement plan, and plan sponsors are looking for help from competent experts,” Ryan Mullen, head of the Defined Contribution Investments group for MFS Investment Management and one of the co-sponsors of the research, told PLANSPONSOR.
“The financial crisis of 2008 has shed a light on the urgent need for employers to help their employees step up their savings efforts. With that comes the need for education, advice and enhanced plan design–all with the goal of helping employees save and accumulate assets for retirement. Certainly professional retirement plan advisers are in an excellent position to guide plan sponsors to help solve this country’s savings problem,” he added.
Mullen said the RAC is not necessarily advocating that sponsors perform an adviser RFP to find the best adviser for their needs.” However, he added that since plan sponsors have fiduciary obligations to their retirement plans, “employing processes across many aspects of the plan is always an important strategy to drive plan success. An adviser RFP is one process a plan can use. As of late, our own DCIO (defined contribution investment only) team has consciously aligned ourselves closely with professional retirement advisers, because we believe this type of adviser will continue to be in demand and will see their practices grow exponentially.”
What Is An Adviser?
Steve LaValley, second vice president, market research for MassMutual Retirement Services and another co-sponsor of the report told PLANSPONSOR the research defined a professional retirement plan adviser as "an investment adviser, securities broker, investment consultant, or benefits consultant who works primarily or exclusively with retirement plans.” Mullen added that the definition includes advisers who “meet with the plan sponsor regularly but at least once a year and who perform a minimum of five out nine possible retirement plan adviser functions.”
Brian Neligan, EACH Enterprise’s director of research, told PLANSPONSOR that these nine functions include:
- Learning the circumstances and benefits philosophy of the plan sponsor’s organization;
- Monitoring the fulfillment of services by the retirement services provider;
- Helping to understand the fees that providers charge for their services;
- Helping to formulate an Investment Policy Statement;
- Assisting with the implementation of the fiduciary process;
- Examining if the plan is administered according to applicable laws, regulations, and stated policies;
- Reviewing investment options with the plan sponsor periodically;
- Supporting the plan sponsor with investment provider and service provider due diligence; and
- Ensuring that participants have access to the education, communication, services and asset allocation counseling they need to make informed decisions.
Additional Findings and Methodology
The plan sponsors in the research said the advisers who fared best in their finalist presentations were those who kept their pitch brief and concise and offered an investment policy that matches that of the plan's investment committee. Responsiveness, courteousness, humility, patience and firmness were also deemed as necessary qualities for an adviser.
LaValley told PLANSPONSOR the 14 plan sponsors were divided into two geographically split groups of seven members each, with the first group consisting of plan sponsors from east-of-the-Mississippi, and the second group consisting of plan sponsors from west-of-the-Mississippi. The plan sponsors were from firms that are privately held, publicly traded, or nonprofit. No government sponsors were part of the research.
He said the focus groups were conducted as a follow up to quantitative research that was conducted in late 2011, the results of which can be found on the RAC website
Mullen added that the plan assets were between $5 million and $1 billion, and approximately half the respondents have more than 1,000 employees and half have less than 1,000 employees but a minimum of 100 employees.
The report was co-sponsored by John Hancock Mutual Funds, MFS Investment Management, MassMutual Retirement Services, and Transamerica Retirement Solutions. It is here.