Data & Research November 6, 2009

Financial Advisers Get Plenty of Provider Communication

The typical adviser receives more than 100 e-mails, mailings, wholesaler visits and internal sales desk calls every month from product providers—and that’s just from the firms they work with, according to Cogent Research.

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The “typical adviser” manages relationships with 14 product providers. A mutual fund firm will contact an adviser an average of seven times a month, but some firms exceed that.

The most active communicators among mutual fund firms are John Hancock Funds and Evergreen Investments, each averaging about 16 adviser client contacts per month. Mutual fund firms who also contact advisers in the double-digits every month are: Black Rock, Fidelity Investments/Advisor funds, and Putnam Investments.

Among exchange-traded fund (ETF) providers, the average number of contacts is five times per month. Rydex is the most active firm, contacting clients 11 times per month. In the variable annuity marketplace, Nationwide Life Insurance Company leads with an average of 12 monthly contacts with advisers using its products.

While frequency of contact is important, Cogent noted that other attributes are important, such as tailored strategies to meet the specific needs of advisers, whose delivery preferences and content needs vary significantly by adviser practice model and investment approach.

“Clearly, when it comes to outreach strategies, it’s not only about quantity. It’s also about quality,” said Cogent Principal and Co-Founder John Meunier. “Over the past year, firms that brought real ideas to the table, from both a product and practice standpoint, have been rewarded with a stronger bond to the advisers they serve.”

Carrie Merrick, senior analyst and author of the Cogent study, noted that providers are jockeying for the attention of the fast-growing registered investment adviser (RIA) segment—but they might want to try new strategies with this group. “RIAs greatly prefer electronic communications over phone calls or visits, especially for sales ideas and monitoring product performance,” she said. “They’re also very open to using Webinars to learn about new product information and business-building strategies.”

Data for the study was collected via an online survey of 1,529 advisers in the U.S. with a minimum of $5 million in assets currently under management.

More information about purchasing Cogent’s Advisor Touchpoints 2009 report is available at www.cogentresearch.com .



Compliance November 5, 2009

403(b) Prototype Likely to Allow for Vesting Schedules

The Internal Revenue Service (IRS) is reportedly working on a final revenue procedure for Section 403(b) prototype plans that takes into account comments received.

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So said James Flannery, a tax law specialist at IRS, said at the annual conference of the American Society of Pension Professionals and Actuaries (ASPPA), according to a BNA report.

The IRS in April announced its intent to offer a prototype program for 403(b) plans (see “IRS Releases Proposed 403(b) Prototype Document Program“). A prototype program offers a master plan with adoption agreements containing various plan options that sponsors may elect or not. Adoption of a prototype comes with a determination letter from the IRS guaranteeing plan compliance with IRS rules.

Previously, to get this guarantee, 403(b) plan sponsors had to file for a private-letter ruling from the IRS that their plan complied. Douglas O. Kant, Senior Vice President and Deputy General Counsel at FMR LLC, pointed out that a prototype program would be cheaper for sponsors than filing for a private-letter ruling.

The biggest suggestion among all commenters to the IRS announcement of the program was to allow prototype plans to include vesting schedules (see “Trade Groups Comment on 403(b) Prototype Program“). According to BNA, Flannery said the IRS thought plans did not provide for this, and it “will amend the revenue procedure to allow for vesting of employer contributions.” The amendment will probably apply to government plans too, he said.

BNA said Flannery also addressed concerns about the draft revenue procedure requirement that the plan document terms override individual contract terms, and said the IRS is “taking a hard look” at that section of the revenue procedure to make it workable.

Among the comments was a suggestion for the IRS to consider a volume submitter program, in which an organization requests approval for a sample or specimen plan, which is then adopted by multiple employers. Employers may adopt versions of the specimen plan that have minor deviations in language, making these plans more flexible than prototype plans. In response, Flannery said that in creating the prototype program, the IRS is responding to recommendations made by the Advisory Committee on Tax Exempt and Government Entities, and going forward, it is “seriously considering” including a volume submitter program for Section 403(b) plans, according to the report.

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