The Spectrem research report said unbundled usage is highest among those with plan assets of $50 million -$199 million and that those going the unbundled route are more likely than those bundling to bring in a consultant to advise on their plan decisions. Sponsors of plans with $200 million or more in assets are the least likely to use unbundled purchasing.
Also in the Spectrem DCIO report:.
- Sponsors of plans with assets of $50 million or more most often cite the CFO as leading the decision process about plan purchases/hiring.
- Sponsors of plans using unbundled purchasing offer slightly fewer investment options to their participants than other sponsors (16 versus 19). They are also more likely to add new investment options over the coming 12 months.
- Employee benefit consulting firms are the type of consultant mentioned most often by both unbundled and full-service purchasers. Among unbundled purchasers, RIAs rank second along with TPAs.
- Unbundled purchasers are less likely than others to use a consultant that is affiliated with one of their plan service providers. They are also more likely to pay fees rather than commissions to the consultants and advisers they use.
Regarding investment selection, the Spectrem study found:
- Mutual funds are the investment vehicle used most frequently among unbundled purchasers, followed by GIC/stable value funds and collective funds.
- About 40% of these sponsors say they anticipate making changes in the types of investment vehicles they use. One-quarter say they plan to add an annuity-based income option to their plan and 13% say they will make greater use of collective funds.
- Respondents ranked a strong performance track record and low investment management fees as most important in the selection and evaluation of plan investment providers.
- More than 20% of sponsors rate four factors very important in the selection process (i.e., 4 or 5 on a 5 point scale), and at the same time rate their satisfaction with the performance of their current providers low (i.e., 3 or lower on a 5 point scale). These factors are the range of options available from the provider (25%); investment management fees (22%); the manager's commitment to the DC business (21%); and the performance track record (20%).
The data used in the development of this report is taken from Spectrem Group's 2008 DC Market Needs study. This was based on a survey of 1,052 decisionmakers responsible for the selection and evaluation of plan service providers at companies with defined contribution plans.
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