The Difference an Adviser Can Make

January 13, 2012 ( – A study for the Retirement Advisor Council found partnering with a professional retirement plan adviser offers benefits for plan sponsors.

However, only 25% of 401(k) and 403(b) plan sponsors, with 100 or more employees and plan assets between $5 million and $500 million, partner with a professional retirement plan adviser. Most of the others do business with a generalist adviser; some do not use an adviser or consultant at all. Laura White, vice president at Diversified, a partner in the research, told PLANSPONSOR, historically, advisers other than professional retirement plan advisers have held a larger share of the not-for-profit market, but Diversified expects the gap will close with time.   

Half of respondents who use a professional retirement plan adviser say it is a necessity to retain the advisers’ services for their plans. Forty-four percent say retaining the services is very beneficial to their plans.  In addition, 16% of respondents with no adviser said retaining one is a necessity and 59% said retaining a professional retirement plan adviser would be very beneficial.  

Overall, 46% of plan sponsors have measured the retirement readiness of their participant population more than once. Clients of professionals are unique in that 75% monitor year-over-year changes and 31% say more than 70% of their participants are on-track to achieve a successful retirement. These superior outcomes may be the result of plan designs that encourage saving. Another contributing factor could be new ideas that clients of professionals adopt more readily than other plan sponsors.  

More than any other category of plan sponsors, clients of professionals rely on a retirement plan committee that meets regularly to make plan decisions. White said 74% with a professional retirement plan adviser state a committee who meets at regular intervals makes decisions regarding the design of the plan or array of investment options.  In addition, 70% complete an investment review at least twice a year; 40% twice a quarter.  

Only 41% of those with another adviser type complete a periodic review of investment options with their adviser as compared to 79% with a professional retirement plan adviser; 73% of those with Professional retirement plan adviser state it’s absolutely critical to review investment options periodically, White said.  

She added that clients of professional retirement plan advisers offer an average of 13 fund types, and most offer 10 or fewer, compared to between 14 and 15 offered by those who do not partner with a professional.  This is important because overwhelmed employees may not invest correctly or may even choose not to enroll in the plan, White noted.  

Clients of professionals have a better understanding of fees. Over 80% of plan sponsors either agree or strongly agree that their fees are reasonable. However, according to White, the study found 35% to 45% of plan sponsors, regardless of the type of advisers they use, have a good handle on the fees their service provider and investment managers are charging; less so among plan sponsors that do not partner with an adviser.  

More than half of plan sponsors who use an adviser other than a retirement plan professional met their adviser after a cold-call from the adviser. On the other hand, 43% of plans that rely on a professional conducted a formal search using a request-for-proposal process.  

The survey of 409 employers offering a 401(k) or a 403(b) plan was conducted online between September 6 and September 27, 2011, with funding and research oversight by Diversified, Franklin Templeton Investments, John Hancock Funds, MFS Investment Management, and MassMutual Retirement Services. An executive summary of the research is available at

Retirement plan advisers PLANSPONSOR spoke to listed a number of ways an adviser can add value for a retirement plan sponsor.  

Advisers can take on 403(b) plan administration from a plan sponsor’s duty, according to Michael A. Webb, Cammack LaRhette Consulting, leaving them time to focus on other things. In addition, a good adviser will explain to sponsors what their fiduciary duties are; fiduciary due diligence requires a prudent expert which a lot of retirement plan committees don’t have, but advisers have that expertise, Webb says.  

Michael DiCenso, National Practice Leader, Gallagher Retirement Services, President, GBS Investment Consulting, adds that there are ERISA and non-ERISA 403(b) plans, and non-ERISA plans also have fiduciary duties, some by state law, so advisers can help them manage their fiduciary risks and set up processes.   

Also, with the upcoming fee disclosure, DiCenso says advisers can add value by helping plan sponsors understand plan fees, determine the reasonableness of fees, and benchmark fees.  

On a participant level, Webb contends, most providers would welcome advisers’ input on participant education -- to address participants’ resistance to change, and very carefully craft communications.  

Another way advisers can add value is to quarterback for provider relationships. Providers have many services plan sponsors can take advantage of, such as tools to get employees to participate in the plan, but sponsors don’t have the time or knowledge to ask for and monitor these services. Advisers can look into these services and measure their success, according to Webb.  

Advisers also help with the selecting, monitoring and benchmarking of plan providers, DiCenso adds.  

When looking for an adviser, Webb says plan sponsors should look at what type of clients they serve, whether they are similar entities, and what they have done for those plans.  

Another key thing is the area of due diligence.  Is the adviser willing to serve as a fiduciary to the plan and say that in writing?   

Sponsors should also ask how many Request for Proposals (RFPs) an adviser has completed, and what their investment experience has been in volatile markets, according to Webb.  

DiCenso says the number one thing is sponsors should look for advisers that are completely independent, free of conflicts and not taking soft dollars from providers. They should truly be acting for the benefit of sponsors and participants. In addition, advisers should have resources behind them, such as chartered financial analysts (CFA's) and attorneys, to help them deliver great value to clients.  

Also, according to DiCenso, advisers to 403(b) plans should have experience and expertise in the 403(b) plan sponsor’s particular market segment: K-12, higher education, healthcare, non-profit, or church plan.