Research

DATA & RESEARCH | PLANADVISER December 2016

2016 PLANADVISER
Practice Benchmarking Survey

The 2016 PLANADVISER Practice Benchmarking Survey gives you a guidepost to see how you compare with your peers.

By Alison Cooke Mintzer See Archive >

Respondent Profile
Total retirement plan assets under advisement
TotalTop ConcernGrowth Area*Avg # of Office LocationsAvg # of Advisers in PracticeAvg # of Support Staff in Practice
<$10MM5%Fee compressionFee benchmarking1.03.32.0
$10MM – $100MM10%Compliance/FiduciaryFiduciary svcs1.63.32.8
>$100MM – $200MM18%Gov’t regulationFiduciary svcs1.73.93.5
>$200MM – $400MM18%Fee compressionFiduciary svcs1.74.25.8
>$400MM – $800MM14%Fee compressionFiduciary svcs2.14.45.3
>$800MM – $1B6%Participant educationFiduciary svcs2.66.04.8
>$1B – $2B15%Competition/DifferentiationStrategic partnerships4.110.722.5
>$2B14%Gov’t regulationFiduciary svcs4.913.728.2
Footnote:
*Besides 401(k) plans
Adviser firm affiliation
20162015CHANGE
National full-service wirehouse24%25%-5%
Dually registered (RIA and B/D)24%24%-2%
Registered investment adviser22%24%-10%
Independent broker/dealer22%17%24%
Insurance or bank broker/dealer2%2%-24%
Regional broker/dealer1%3%-52%
Other5%4%49%
Practice Structure
Are you personally involved in evaluating and recommending fund choices in an advisory capacity with your qualified plan clients?
20162015CHANGE
Yes94%93%2%
Are you personally involved in evaluating and recommending defined contribution plan providers/recordkeepers in an advisory capacity with your qualified plan clients?
20162015CHANGE
Yes93%94%-1%
Do you have a written business plan that governs your practice?
20162015CHANGE
Yes85%84%1%
Are you a fiduciary to plan participants?
20162015CHANGE
Yes53%44%20%
Are you a fiduciary to clients’ plans?
20162015CHANGE
Yes, 3(16)4%5%-19%
Yes, 3(21)92%90%2%
Yes, 3(38)60%56%5%
No5%6%-15%
Do you provide individual advice or wealth services to plan participants?
20162015CHANGE
Yes63%60%5%
Fees/Revenue
How fees are disclosed to plan sponsor clients
20162015CHANGE
Annual review81%75%7%
Contract79%76%4%
Fee disclosure statement69%68%1%
408(b)(2) disclosure statement65%67%-3%
Form ADV48%53%-9%
Request for Proposals32%35%-9%
Average division of revenue
20162015CHANGE
Adviser salary30%29%6%
Broker/dealer20%21%-5%
Staff salaries16%16%-1%
General expenses9%9%1%
Partner salary9%10%-11%
Travel expenses4%4%-9%
Marketing expenses3%3%-7%
Tools and services3%3%2%
Compliance expenses2%2%9%
Other3%4%-17%
How advisers are paid for qualified plan business
20162015CHANGE
Fees based on assets88%88%-1%
Hard dollar/Flat fee (regardless of size)80%78%3%
ERISA budget/ERISA reimbursable50%52%-3%
Per project35%37%-6%
Commissions/12b-1 fees (flat fee)32%30%6%
Commissions/12b-1 fees (variable)26%30%-15%
Per participant8%8%-6%
Whether compensation varies based on products or services offered
20162015CHANGE
Yes43%43%1%
No57%58%-1%
Average annual charge for services to retirement plans, by plan size (BPS = basis points)
$1MM$5MM$20MM$50MM$100MM$250MM$500MM$1B
<1 bp1%1%0%0%0%3%6%13%
1–5 bps1%1%1%4%19%39%29%14%
6–10 bps0%1%15%43%45%14%6%1%
11–25 bps10%32%73%36%7%3%1%0%
26–50 bps42%55%7%1%1%0%0%0%
51–75 bps22%6%0%1%0%0%0%0%
76–100 bps10%1%0%0%0%0%0%0%
>100 bps1%0%0%0%0%0%0%0%
Do not service this size0%0%0%0%0%0%0%0%
Broker/Dealers and Custodians
Most common custodians for RIAS
% of Advisers Using Each 2016% of Advisers Using Each 2015CHANGE
LPL Financial29%29%1%
Schwab26%38%-30%
Fidelity (NFS)24%25%-5%
TD Ameritrade11%19%-40%
Pershing, LLC9%10%-10%
Matrix7%14%-54%
Vanguard5%6%-14%
NFP Securities, Inc.5%4%40%
Independent Financial Partners5%2%122%
UBS5%6%-20%
Wells Fargo5%5%-14%
Wilmington Trust4%10%-61%
State Street2%7%-66%
J.P. Morgan2%6%-69%
Prudential Financial2%4%-57%
Primary benefits received from custodians
20162015CHANGE
Trading platform47%49%-6%
Retirement specialists29%26%8%
Online access to trust reporting23%22%5%
Robust trust and trading reports20%19%10%
Plan distribution processing (to plans)11%14%-23%
Trading alerts10%6%63%
Other17%20%-15%
Custodian adds no value15%18%-14%
Adviser ratings of their custodians
20162015CHANGE
Excellent 24%34%-30%
Good 56%48%15%
Satisfactory 17%17%0%
Poor 3%1%391%
Most common broker/dealers
20162015CHANGE
LPL Financial28%27%4%
Morgan Stanley Smith Barney15%17%-14%
UBS Financial Services6%7%-22%
Merrill Lynch4%6%-20%
NFP Securities, Inc.4%5%-21%
CapFinancial2%1%90%
Wells Fargo Advisors (First Clearing LLC)2%2%-15%
Commonwealth Financial Networks1%1%105%
Raymond James Financial Svcs, Inc.1%2%-58%
Cambridge Investment Research1%2%-58%
MML Investors1%0%n/a*
M Holdings Securities1%1%-58%
Footnote:
*n/a = not applicable
Primary benefits received from broker/dealers
20162015CHANGE
Compliance oversight79%72%10%
Technology/IT support58%55%5%
Marketing support46%38%22%
Brand name recognition45%43%6%
Participant education materials/support42%32%34%
Wealth management support41%39%5%
Lead generation/Referrals39%14%177%
Retirement plan search34%26%34%
Investment due diligence33%42%-21%
Retirement plan expertise23%42%-44%
Retirement income projection tools21%17%21%
Co-fiduciary support17%41%-59%
B/D adds no value6%6%0%
Adviser ratings of their broker/dealers
20162015CHANGE
Excellent 44%50%-11%
Good 39%39%1%
Satisfactory 14%11%27%
Poor 3%1%227%
Marketing and Service Models
Where do you find most of your new clients?
20162015CHANGE
Referrals from other professionals/Strategic relationships64%65%-2%
Referrals from existing clients25%22%11%
Seminars3%2%27%
Cold calling4%4%-10%
Email marketing/Newsletters1%2%-66%
Search engine optimization1%0%n/a*
Webinars1%1%-32%
Social media0%0%n/a
Other2%3%-29%
Footnote:
*n/a = not applicable
Which of the following success measures do you use with retirement plan clients?
20162015CHANGE
Participation rates77%82%-7%
Deferral rates of various employee segments70%75%-6%
External/Competitive benchmarking of plan design65%69%-6%
% of participants with “appropriate” asset allocations (i.e., close to target-date fund glide path, etc.)52%57%-8%
% of participants meeting retirement income replacement ratio goals (i.e., will replace X% of income in retirement)50%56%-11%
% of participants who increased deferral rates in the prior 12 months45%50%-10%
% of participants saving to match42%47%-11%
% of participants meeting projected monthly retirement income goals (i.e., $X per month in retirement)32%34%-6%
% of participants using advice tools/seminars offered through the plan28%31%-11%
Employee satisfaction with plan (through survey)26%28%-10%
Other14%7%110%
None (We have no formal plan success measures)3%3%5%
Concerns and Expectations
What is your top concern facing your practice today?
20162015CHANGE
Fee compression34%35%-3%
Compliance/Fiduciary issues33%25%33%
Government regulation33%38%-13%
Adding new clients30%26%16%
Practice management27%28%0%
Competition/Practice differentiation25%28%-11%
Marketing18%17%10%
Staffing18%21%-15%
Participant communication/education16%24%-33%
Profitability13%16%-21%
Plan sponsor communication/education11%11%1%
Client retention11%10%8%
Technology10%12%-18%
Succession planning8%7%9%
Overall economy6%5%20%
Fee disclosure/transparency4%6%-35%
In terms of the number of investment options on your DC plan client lineups, have the number of funds changed in the past year?
20162015CHANGE
The number of funds on DC plan lineups have increased for many/most of my DC clients0%11%-100%
The number of funds on DC plan lineups have stayed the same for many/most of my DC clients0%61%-100%
The number of funds on DC plan lineups have decreased for many/most of my DC clients0%28%-100%
How confident are you that most of you plan sponsor clients’ employees will achieve their retirement income goals by age 65?
20162015CHANGE
Very confident4%4%-9%
Confident22%25%-9%
Somewhat confident46%42%9%
Only a little confident19%20%-6%
Not at all confident8%9%-2%
Unsure1%0%96%
What do you predict will be the most significant growth area/strategy for your practice in the next 12 months?
20162015CHANGE
401(k) plans51%48%7%
Fiduciary services46%36%27%
Referrals33%32%4%
Strategic partnerships30%31%-3%
Participant advice/education28%33%-15%
Plan/Fee benchmarking22%19%15%
Defined benefit plans14%14%0%
403(b) plans13%17%-26%
Nonqualified plans12%14%-13%
Rollovers8%8%7%
Retirement income discussions8%14%-40%
Target-date funds6%6%-8%
Other workplace benefits5%5%4%
Retirement income products5%6%-25%
Fee disclosure4%3%20%
Health care3%2%4%
Exchange-traded funds2%2%-22%

Methodology

In September, approximately 15,000 subscribers to PLANADVISER were asked to respond to a 37-question survey, developed by the PLANADVISER editorial and research teams. Survey questions pertained to size and scope of the advisers’ qualified plan business, practice management, compensation and client services, as well as their assessments of investment managers, mutual funds and defined contribution (DC) providers. The provider assessment results appeared in the Retirement Plan Adviser Survey in the September/October issue. At the close of the survey, 613 complete responses had been received from retirement plan advisers. 2016 results for each category are rounded to the nearest percentage; the year-over-year change column is calculated based on unrounded actual results. For more information and for additional research available, please contact surveys@strategic-i.com.