Choosing Industry Favorites

Arguably, retirement plan advisers have a better—or at least a more comparative—perspective than their plan sponsor clients about the relative strength of products and services offered by investment and recordkeeping providers. After all, advisers can—and usually do—work with many of them concurrently. The 2015 Retirement Plan Adviser Survey, our eighth, endeavors to gain insight from the adviser community about how providers and funds are selected, and which are the favorites each year.

With this edition, the adviser survey returns to being published in two parts, as was the case prior to last year. In this issue, we examine advisers’ favored fund families and specific mutual funds for their retirement plan sponsor clients, as well as their evaluations of recordkeepers. The November–December issue of PLANADVISER will feature the annual Practice Benchmarking Survey, highlighting adviser practice structure and experience, with the intent of helping advisers learn from, and benchmark against, their peers’ experiences. This year, we were fortunate to receive complete survey responses from more than 450 retirement plan advisers, enabling us to present data that is representative of the adviser community as a whole.

On the investment side, criteria for selecting funds have remained remarkably stable. Again this year, as has been the case in several of our surveys, performance vs. benchmarks was the top criterion for selecting appropriate funds. Out of 11 categories, 91% of advisers ranked this first, second or third. Five-year return was next most important, ranked in the top three by 78% of respondents, followed by plan fee structure (66%).

Fee structures factor more significantly into the recommendations of recordkeepers. When evaluating recordkeepers this year, advisers appeared to keep plan sponsors’ costs in mind: They considered value for price the most important criterion (54% ranking it first or second), followed by fee structure for the plan (50%) and investment options available (38%).

When asked to list the top five fund family recommendations they offer plan sponsors, advisers once again chose Vanguard as their preferred fund family, with 87% listing the firm in their top five—a big increase from last year’s 57%. American Funds came in second at 66% (up from 49% last year), followed by J.P. Morgan (53%) and T. Rowe Price (48%).

The 2015 list of most recommended mutual funds includes a mix of active, index and target-date funds (TDFs). Like last year, Vanguard’s 500 Index Fund was the most popular suggestion for plan menus, with 27% of advisers recommending it, about the same as last year’s 28%. Another Vanguard product, the firm’s Target Retirement Fund series, appears second on the most recommended fund list, with a 14% adviser recommendation rate. In third place again this year is the T. Rowe Price Target Date Fund series, and American Funds EuroPacific Growth shows up in fourth place, down from second last year.

Plan sponsors rely heavily on advisers for their expertise in selecting and monitoring investment and recordkeeping providers. Therefore, both plan sponsors and their advisers frequently share fiduciary responsibilities when it comes to plan governance. That means they can be personally on the hook if they are unable to show a prudent and documented process in their search for these providers. 

Survey Methodology: This September, approximately 15,000 adviser subscribers to PLANADVISER were asked to respond to the 2015 PLANADVISER Plan Adviser Survey, developed by the magazine’s editorial and research teams. Survey questions pertained to the size and scope of advisers’ qualified plan business, practice management, compensation and client service, as well as their assessments of investment managers, mutual funds and defined contribution (DC) providers.

At the close of the survey, 452 complete responses had been received from retirement plan advisers. To qualify to supply opinions on mutual fund families and specific mutual funds, an adviser had to be personally involved in evaluating and recommending fund choices in an advisory capacity to qualified plan clients; 225 advisers met this criterion.

In order to evaluate defined contribution providers, advisers had to answer affirmatively that they personally evaluate and recommend DC providers in an advisory capacity for qualified plan clients; 275 advisers did so. In addition, an adviser needed to have worked with a defined contribution provider more than once for his favorability rating of that recordkeeper to count. For more information and additional research available, please contact surveys@assetinternational.com.