Data & Research December 3, 2019

Data Mine—December 2019

With each edition of the PLANADVISER Data Mine, we dig for the most actionable findings in the latest retirement plan industry research.

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Art by Jennifer Xiao

Are you inundated with data? Confused by surveys that seem to provide conflicting insights? With each edition of the PLANADVISER Data Mine, we dig for the most actionable findings in the latest retirement plan industry research. You can also click through to the full research reports, should you want to learn more about a particular topic. 


Survey

Advisor Authority Study

Published by Nationwide Advisory Solutions  

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Key Findings
  • Three in 10  Millennial advisers say that adding new technology is the most important thing they will do this year to enhance profitability  
  • 11% of Baby Boomer advisers report adding technology is the most important profitability strategy for the year
  • 20%  of Millennial advisers say that consolidating existing technology is most important to enhance profitability 
  • 3% of Baby Boomer advisers say consolidating existing technology is most important to enhance profitability

Full survey available here. Nationwide’s survey report concludes that, just as Boomers can take a page from Millennials’ playbook, by adopting AI, robo-advice solutions and other technology, Millennials can follow the lead of more experienced advisers, by not losing sight of the human connection, building strong one-on-one relationships and working with their clients’ family and children to build a more profitable practice. 

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Survey

Top Priorities for Defined Contribution Plan Sponsors for 2020

Published by Mercer

Key Findings

Mercer presents the same three broad themes for 2020 as it did for 2019, but with additional depth, detail and related action steps. The first theme is to “secure your foundation.” In this litigious environment, ensuring that plans have a strong governance framework in place is essential. Next is to “achieve greater prosperity.” Mercer says sponsors should focus on improving participant outcomes, considering broader financial needs, not just retirement. Finally, theme three is to “inspire confidence.” By ensuring that retirement plans are geared to address the diversity of participant needs, not just those of the mythical average participant, sponsors can make participants more confident in their ability to achieve financial security on their own terms.

Full survey available here. As Mercer’s experts explain, the more things change, the more they stay the same. The industry issues defining 2020 are similar to those highlighted for 2019. This should be no surprise given that litigation has stayed at the fore, the focus on fees remains, and interest in broader financial wellness continues. Also as predicted, the retirement phase of defined contribution plans has attracted increasing attention.

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Survey

2019 PLANADVISER Retirement Plan Adviser Survey

Published by PLANADVISER Magazine

Key Findings

Advisers’ most preferred funds (i.e., each voter’s first choice) make up a pretty narrow list—only 32 funds, just six of which were cited five or more times. Those are Fidelity 500 Index Fund, PIMCO Income Fund, T. Rowe Price Blue Chip Growth Fund, T. Rowe Price Target Date Funds, Vanguard 500 Index Fund and Vanguard Target Retirement Funds.

Full survey available here. While some areas of consensus emerged in the survey, advisers nominated 77 different fund families when asked to name their top five most preferred families. Twenty-nine received five or more references each. Responses were even more diverse when advisers were asked what individual funds they would recommend to a plan sponsor client. They cited 255 unique funds, covering a wide range of strategies—including both active and passive management, domestic and international stocks, and bond funds. Even a few stable value and socially responsible investing (SRI) funds made the list.

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Survey

U.S. Outsourced Chief Investment Officer Function 2019: Emerging Trends in a Maturing Industry

Published by the Cerulli Associates 

Key Findings

Outsourced chief investment office (OCIO) providers’ fees have benefited from a historical lack of awareness of the OCIO model by clients and few providers in the market. As the number of OCIO providers grows, and clients become aware they have many options, there is greater downward pressure on the fees that OCIO providers are able to charge for their services. Competition and fee comparison relative to peers are ranked as the top challenges OCIO providers face (57% and 43%, respectively), according to Cerulli’s reports. 

Full survey available here. Competitive landscape changes are causing a trickle-down effect on pricing, according to Laura Levesque, senior analyst at Cerulli. “The resulting economies of scale for the larger players make it easier for them to lower fees, as a result, smaller players need to come to the table with a competitive value proposition,” says Levesque. The report finds that nearly three-quarters (72%) of OCIO providers have reduced published fees schedules over the last three years.

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Survey

NAGDCA 2019 Benchmarking Report 

Published by the National Association of Government Defined Contribution Administrators  

Key Findings
  • 49% is the participation rate for state-sponsored DC plans 
  • 68% is the participation rate for non-state plans  
  • 93% of responding government DC plans had participants that were also eligible for a pension benefit
  • 23% of government DC plans use automatic enrollment  
  • 10% of government DC plans use automatic escalation from which participants must opt out. 

Full survey available here. NAGDCA has been an advocate for states allowing government DC plans to use auto-enrollment. With so much burden of responsibility being placed on the individual today, it is imperative to change the retirement savings system to better serve those that serve the public, by working to make auto-enrollment and auto-escalation programs available to all public sector employees. 

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