Stacking Up

Retirement plan advisers’ perspectives on investment and recordkeeping providers are critical to their work for plan sponsor clients. This year’s PLANADVISER Retirement Plan Adviser Survey, our eighth, provides valuable insight into how your peers select providers and funds, as well as the ones they rank highly.

On the investment side, performance is advisers’ utmost concern, indicating that they put delivering a robust investment lineup ahead of investment manager support, manager tenure, style drift and brand—even how they and the plan are paid. The first criterion advisers turn to when selecting a fund is its performance against benchmarks, with nearly half (47.5%) citing this as the most important factor. The next measure of performance that advisers look at is five-year returns, rated second by 30.3%, followed by one-year returns, named third by 33.8%.

When asked to list their top five fund family recommendations for plan sponsors, Vanguard came in overwhelmingly at No. 1 (56.9%), suggesting that its low fees and passive investment style are gaining favor among advisers and their clients. The second most commonly recommended fund family is American Funds (49.4%), followed by
T. Rowe Price (34.5%), J.P. Morgan (31.5%) and Fidelity (29.2%).

In terms of the individual mutual funds that advisers recommend, PIMCO’s Total Return Fund dropped noticeably from No. 1 in 2013, 2012 and 2011 to seventh place, cited by only one-fifth of advisers. As founder Bill Gross departed the firm before we conducted the survey, it will be interesting to see whether PIMCO even makes the top 10 list next year.

Not surprisingly, in line with advisers’ fund family preferences, Vanguard’s 500 Index Fund came in first, with 27.5% of the votes. This was followed by American Funds Euro Pacific Growth (14.4%), T. Rowe Price Target Date Funds (TDFs) (12.2%), J.P. Morgan SmartRetirement Target-Date Funds (10.5%) and Vanguard Target Retirement (8.3%). As three of the top five are target-date funds, that option’s increasing popularity is a noteworthy development we will continue to track.

For the 11 supporting criteria that investment firms offer advisers, Fidelity came in first five times, indicating that advisers view the company as a defined contribution (DC) plan champion for its: supporting materials, participant support, sponsor support, sponsor education materials and participant education materials. The investment firm next most commonly cited as a market leader in terms of support was J.P. Morgan, ranking as No. 1 for three sales-related criteria: adviser support/value-added services, quarterly evaluation materials, and wholesalers. Vanguard was rated first for its reputation and investment value for price, and American Funds was No. 1 for its fund fact sheets.

On the recordkeeping side of the equation, the two most important standards advisers consider when selecting a provider are value for price (cited first by 35.5%) and fee structure for plan (ranked second by 24.3%)—suggesting that recordkeeping is largely a commodity business. However, the extra services recordkeepers add are evidently worth paying for, according to responders, whom we challenged a step further by asking them to evaluate recordkeepers in 18 different product and service areas, as well as client segments. Fidelity Investments was rated first in seven of these categories, Great-West Retirement Services topped six, and John Hancock Retirement Plan Services came first in three.

Survey Methodology

This October, approximately 1,500 adviser subscribers to PLANADVISER were asked to respond to a 42-question survey, developed by the PLANADVISER editorial and research teams. Survey questions pertained to size and scope of the adviser’s qualified plan business, practice management, compensation and client service, and his or her assessments of investment managers, mutual funds and defined contribution (DC) providers.

At the close of the survey, 623 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; 379 advisers met this qualification.

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; 339 advisers did so. In addition, an adviser had to have worked with a defined contribution provider more than once for his or her favorability rating of that recordkeeper to count. For more information and for additional research available, please contact surveys@assetinternational.com.

Art by Christian Northeast