Plan Sponsors Get, Want More From Advisors

December 23, 2003 ( - Investment advisors are increasingly important to the delivery of a host of services to retirement plans, and retirement plan sponsors, and one can see their continued emergence in the demographics of the 2003 PLANSPONSOR/Hartford Financial Advisor Survey.

Asked to compare the current apportionment of responsibilities, plan sponsors were largely comfortable with their current role in determining investment goals and objectives.   However, when it came to most other advisor-related duties, they were clearly desirous of more involvement from their advisor, their 401(k) provider, or both.   For example, when it came to choosing a broad range of investment choices, they were largely comfortable with the current level of support from their advisor – but wanted more from their 401(k) provider.  

Investment “Policies”

However, in the area of establishing a written investment policy statement, they were comfortable with the current contributions from their 401(k) provider, but wanted more – significantly more – support from their advisor.   The biggest disconnect appeared in monitoring the investment program for compliance with the investment policy statement.   Plan sponsors said they had about a third of the responsibility for this function currently, but in “ideal” circumstances would have less than 10%.   Instead, survey respondents wanted more from their 401(k) provider – and significantly more involvement from their advisor in monitoring their IPS.

Those results, considered in tandem with another recent survey PLANSPONSOR survey of advisors commissioned by The Harford (see  November PLANSPONSOR), suggests that plan sponsors, providers, and advisors are continuing to grapple with a growing awareness of the fiduciary obligations associated with a retirement program.   The fulfillment of those fiduciary obligations – to act with care, skill, prudence and diligence, to act in accordance with the plan document, and to do so solely in the interests of plan participants – is, of course, reflected in the fiduciary obligation to diversify plan investments.  

The survey data suggests an emerging three-legged fiduciary “network” that includes not only the plan sponsor, but the advisor and the provider working in partnership to fulfill those responsibilities.   In fact, not only did the vast majority of plan sponsor respondents say that their retirement plan provider and financial advisor helped them to fulfill their fiduciary responsibilities – they did so in nearly identical proportions (75.6% and 74.1%, respectively) – and at a rate nearly twice as high as their attorney, which came in a distant third.   Additionally, financial advisors and the retirement plan provider were the top two sources cited by plan sponsors in helping them understand the latest legislative and regulatory changes.

Fiduciary Focus

Still, a perceptual gap remains.   While 71.6% of plan sponsor respondents said they understood the definition and role of a fiduciary, that result stood in contrast to a comparable survey of advisors, in which nearly 60% of advisors said their clients were not fully aware of their fiduciary responsibilities – and more than 37% said they had plan sponsor clients who were not currently fulfilling those responsibilities (see  PLANSPONSOR, November 2003 ).