Staying Relevant Means Happy Clients

Large and small employers that use plan advisers do so in different ways, according to the 2013 PLANSPONSOR Defined Contribution (DC) Survey. Small plans are more likely to use advisers for guidance with investment selection—at both the plan and participant levels. Larger plans tend to use advisers more selectively—for review of fund performance and presentations to the employer’s investment committee.

Perhaps it is because larger plans can select the areas where they would like their advisers to focus that these plans tend to give higher recommendation scores to their advisers than smaller plans do. The average score that plans with less than $1 million in assets gave their adviser was 6.08 on a scale of 1 to 7, with 7 being “extremely likely to recommend,” versus a score of 6.36 from plans with more than $1 billion.

The fiduciary role an adviser holds with respect to his clients’ plans also seems to have a direct influence on client satisfaction. For instance, advisers who act as both 3(21) and 3(38) fiduciaries* for clients enjoy considerably higher recommendation rates than advisers with no fiduciary role. Nearly 72% of clients whose adviser is both a 3(21) and 3(38) fiduciary would be “extremely likely” to recommend that adviser to a colleague, versus just 56% of plans that do not use their adviser in any fiduciary capacity. It seems that sponsors want true partners in their adviser relationships—which should be a welcome opportunity for retirement plan advisers.

*In a 3(38) fiduciary arrangement, the plan sponsor gives the adviser the discretion to make investment selections for the plan and is responsible for selecting the 3(38) manager but not the funds. A 3(21) fiduciary adviser makes plan and investment recommendations to the plan sponsor, but the plan sponsor/plan fiduciary maintains fiduciary responsibility for final decisions.