Art by Sam Lynn
In fact, to better understand the distinctive properties
of micro plans, our Micro Plan Survey compared plans that have less than $1
million with those having $1 million to $5 million in assets. The potential to
serve plans with under $1 million is even greater, as only 43.7% of them use an
In many areas of adviser support and plan design, micro
plans fall woefully short of the standards found in midsize and large
plans—creating openings for experienced retirement plan advisers to make a
strong case when pitching their business to this market.
For instance, working with an adviser in a fiduciary
capacity is not the norm for micro offerings; not even a third of them (29.5%)
have an adviser with fiduciary status. In the instances where their plan’s
adviser does have that role, 12.6% serve as a 3(21) fiduciary, 10.4% as both a
3(21) and a 3(38), and a mere 6.5% of micro plans have an adviser who is a
3(38) fiduciary only.
As to services, the top five that advisers offer to micro
plans are: reviewing fund performance (90.6%), investment selection guidance
(87.6%), evaluating/explaining provider fees (72.8%), group participant
education (70.7%) and one-on-one
participant education (70.1%).
It appears that micro plans could use help setting up
their offerings; the micro plan participation rate averages 74.2%, with a mean
account balance of $71,483. Ample opportunity to develop more targeted and
effective plan designs awaits the adviser who works in the micro market, as
fewer than one in five (19.2%) plans has automatic enrollment, and a scant 7.9%
have automatic escalation. When they do use auto-enrollment, the plans most
commonly default participants’ contributions at 3% of their salary, cited by
Advisers looking to improve participant outcomes can find
similar opportunities in other plan metrics. For example, although six in 10
(59.6%) micro plans offer matching contributions, only one-third (35.5%) of
those plans report that nearly all participants (over 90%) are contributing
enough to maximize the match.
Plan design and participant outcomes are not the only
potential conversation starters for advisers. With an average of 22.4
investment options offered, micro plans might be overwhelming their
participants with too many choices. Additionally, only 43.6% of micro plans
have an investment policy statement (IPS), which means that helping plan
sponsors with their investment due diligence is yet another box prospecting
advisers can check off in their sales meetings.