The survey of more than 1500 plan sponsors revealed that while 36.2% of plans with less than $5 million in assets offered investment advice, just 16.5% of those with more than $200 million in assets did. Roughly a quarter of those plans with $50-200 million in plan assets offer this service.
Despite the wave of “new” advice providers, nearly half (45%) of plan sponsors offering advice do so via a financial provider outside of the plan, compared with just 12% for Financial Engines, the next most cited alternative.
In fact, financial planners were the advice of choice across all market segments, garnering 40-50% of all except plans with more than $200 million in assets, where the category accounted for 25% of the responses.
Behind the Numbers
However, in selected follow-up interviews with survey respondents, the prevalence of investment advice in smaller plans seems to take on different characteristics. Some sponsors apparently viewed any type of investment materials or education as “advice,” rather than the more technical definition.
Additionally, a number were simply instructing participants to take advantage of professional investment advice in considering their retirement planning. However, a number in our sampling had established a “relationship” with a local financial planner who had taken the time, trouble and effort to work with employees.
While these relationships tended to be informal between the plan and the provider, participants nonetheless seemed to be benefiting from the arrangement.
The vast majority of advice provided was plan specific (82%), while nearly half (46%) offered access to a live advisor. Still, only a third offered advice on outside funds, just a quarter included nonretirement assets in the evaluation and a mere 3% included company stock in the portfolio recommendations. About 12% offered “one-click” realignment of participant balances alongside the recommendations.
Over half of the responding plans paid for the advice, compared with 20% where participants paid. Thirteen percent shared the cost. Larger plans were more likely to have participants pay the cost (34%), as were mid-size plans (25%).
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