More Advisers Look for Co-Fiduciary Support from their B/Ds

An analysis of our annual PLANADVISER Practice Benchmarking Survey over the past eight years shows considerable changes in the ways that retirement plan advisers run their practices.

Most notably, advisers have moved away from independent broker/dealers and gravitated more to national wirehouses. In 2011, 18% of advisers were with a national wirehouse and 32% with an independent broker/dealer. In 2019, 25% of advisers are with a national wirehouse, and only 9% are with an independent broker/dealer.  Also, more retirement plan advisers have become registered investment advisers. RIAs numbered 19% of the universe in 2011 and have grown to 39% this year.

In addition, more advisers are dual-registered. This was the case for 15% of advisers in 2019 but 22% in 2019.

As to the primary benefits advisers receive from their broker/dealers (B/Ds), it is clear that their support has become more important to advisers. Compliance oversight is still the No. 1 item, and it has only risen in importance, from 71% in 2011 to 91% in 2019. We did not ask about technology and IT support in 2011, but it appears as advisers’ second most-appreciated service from their broker/dealers in 2019, cited by 63% of advisers.

Co-fiduciary support has become much more important to advisers, rising substantially from 31% in 2011 to 63% in 2019. Investment due diligence has also ticked upwards, from 44% to 61%, as has marketing support (28% rising to 59%). We also asked advisers this year about wealth management support, with 61% saying this is a primary benefit they receive from their broker/dealers.

We expanded the number of B/D services that we ask advisers about since we first issued the survey and found that advisers also value participant education materials and support (59%), retirement plan expertise (54%), retirement income projection tools, (41%) retirement plan searches (41%) and lead generation and referrals (26%).

The way that advisers prospect for new clients has remained largely the same, however. The most common way that advisers find new clients remains referrals from other professionals (57% and 53%), followed by referrals from existing clients (24% and 40%).

In 2019, 80% of advisers have a written business plan that governs their practice. Eighty percent provide individual advice or wealth services to plan participants. Thirty-six percent offer health savings account (HSA) consulting services, and 47% are planning to do so—for a combined total of 83%.

The three most common ways that advisers disclose their fees to their plan sponsor clients are through the contract, annual reviews and 408(b)(2) disclosure statements. The three most common ways that advisers are paid for their qualified plan business are through flat fees (91%), fees based on assets (89%) and through an Employee Retirement Income Security Act (ERISA) budget or ERISA reimbursements (57%).

The three biggest allocations of their revenue are to adviser salaries (37%), B/D services (14%) and staff salaries (14%).

The 2019 survey also asked advises about the primary benefits they receive from their custodians. They are the trading platform (48%), online access to trust reporting (31%), robust trust and trading reports (18%), plan distribution processing to plans (17%) and retirement specialists (14%).

The survey also asked advisers what technology solutions they use. Ninety-three percent use customer relationship management (CRM) platforms, 87% portfolio management tools or systems, 71% cloud-based document storage systems and 70% financial planning software.

Advisers use a wide range of criteria to measure the success of the plans they oversee, but the No. 1 factor is participation rates (92%), followed by deferral rates (90%) external benchmarking of plan design (70%), the percentage of participants with appropriate asset allocations (65%) and the percentage of participants meeting retirement income replacement ratio goals (63%).