2017
PLANADVISER Practice Benchmarking Survey

Peer Review

2017 PLANADVISER Practice Benchmarking Survey

When you think about your biggest challenges and opportunities, how you measure plan success, and what services you offer to your clients, it helps to know how your peers approach these crucial topics. Asked what the top concerns were facing their practice today, advisers responding to our 2017 PLANADVISER Practice Benchmarking Survey overwhelmingly cited fee compression, with 40% saying this is a source of unease, up markedly from 34% in 2016.

Robert Kieckhefer, managing partner in The Kieckhefer Group in Milwaukee, says he is not surprised this is a lingering worry for advisers. “Fee compression will continue because it is one thing a plan sponsor can measure and be held accountable for by the Department of Labor [DOL],” Kieckhefer says. However, he is somewhat optimistic that advisers can put the brakes on this trend by “showing their value to plan sponsors, working more efficiently” and shifting some administrative tasks to the home office or recordkeepers.

The survey also found that advisers’ other concerns are adding new clients (cited by 32%), practice management (by 30%), competition/practice differentiation (by 28%), government regulation (by 24%) and staffing (by 23%). Conversely, it is very encouraging that only 4% are worried about the overall economy and 14%, about client retention.

When it comes to the area of their practice where they expect the most growth  in the coming 12 months, responses were, again, in line with last year’s survey, with 53% saying 401(k) plans and 40% saying fiduciary services or referrals, respectively. For all of the talk about retirement income, a mere 7% think this will give a boost to their business in the near term, and, perhaps because of the current popularity and pervasiveness of target-date funds (TDFs), only 7% cite them.

“We see growth coming from the same three areas,” says Dan Peluse, director, retirement plan services, at Wintrust Wealth Management in Chicago, pointing to 401(k) plans, fiduciary services and referrals. In fact, Peluse says, more plan sponsors that have not previously worked with an adviser are now in the market to hire one. “With the continued move toward specialist advisers and the impact from the DOL fiduciary rule still playing out, we see more opportunities coming from internal and external referral sources that are looking to partner with completely objective qualified plan advisory firms.”

Kieckhefer observes it is imperative for a retirement plan advisory practice to consistently expand its client base and says it is this option “or get out of the business. The only increase in efficiency is in increasing the number of plans and assets.”

Another notable development in this year’s survey is the increase in the percentage of advisers acting as a 3(21) or 3(38) fiduciary. Ninety-five percent are now a 3(21) fiduciary, up from 92% in 2016, and 68% are a 3(38), up from 60%. Considering that the fiduciary rule definition has changed, one may wonder about the 6% who say they are not a fiduciary and about the plan services they do—and do not—offer.

Peluse says this trend is likely only to continue, noting that “most plan sponsors want to distance themselves from any and all fiduciary liability. When the new fiduciary rule was being written, most plan sponsors were worried about the unknown and whether the rule would increase their fiduciary risk. This unknown has prompted plan sponsors’ interest in 3(21) and 3(38) fiduciary services, and many advisers have responded to the anticipated need.”

As to how retirement plan advisers measure the success of the plans they serve, they continue to consider the basics: participation rates (84%), deferral rates (78%), external benchmarking of plan design (72%) and the percentage of participants invested in appropriate asset allocations, such as TDFs (69%).

However, this year has seen an increase in advisers analyzing the number of participants on track to meet their retirement income replacement goals. Fifty-eight percent of advisers say they now consider this to be a plan success measurement, up from 50% in 2016.

Peluse says he views this as “encouraging, as retirement readiness measurements tell the story of participant and plan-level success.”

Art by Lisk Feng