2018
PLANADVISER Practice Benchmarking Survey

Taking a Measure

How advisers were building their practices this year

The responsibilities of retirement plan professionals extend beyond assisting with, or acting as a fiduciary with respect to, the fund lineup; educating participants; and establishing a sophisticated, robust plan design. Fee compression, adding new clients, and practice management also reign among top concerns for advisers, according to the 2018 PLANADVISER Practice Benchmarking Survey.

This year’s findings, in some respects, mirrored those from 2017, with, for example, only slight changes in the two “top concern” numbers. Among the advisers surveyed, 39% cited fee compression as their top worry—just 1 percentage point less than the 40% who selected it last year—highlighting advisers’ continued apprehension about fees and getting paid. Practice management was the second largest concern—29% of advisers cited it as such, in line with the 30% who did so last year.

Somewhat interestingly, while concerns remained high over fees, worries about profitability saw the largest decline in the category—a 10-percentage-point decrease from 21% last year to 11% this year. Other leading worries included adding new clients (cited by 28%), competition/practice differentiation (25%), staffing (25%), government regulation (23%) and compliance/fiduciary issues (22%).

The degree of change within other response categories was mixed. 2017’s figures were consistent with previous survey results, yet, while some 2018 numbers lined up with them, others saw a sizable shift.

For instance, regarding the strategy or area advisers predicted would yield the most growth for their firm in the coming year, 51% cited 401(k)s—a 2-percentage-point decline from 53% in 2017; however, 10% fewer advisers cited referrals than in 2017—30% vs. 40%, respectively. Expecting fiduciary services to produce the most growth declined 6 percentage points, with 34% of advisers calling it their most promising area for development next year.

As the adviser firm mergers and acquisitions (M&As) kept increasing, many respondents yet to make the move seemed drawn to the possibility. Thirty-six percent said strategic partnerships will be their main growth strategy in 2019, up from 32% last year.

This year’s findings indicate some changes in how advisers approach investment lineup construction. When asked how the number of investment options in their clients’ defined contribution (DC) plan lineups had changed over the past year, only 10% said these had increased—sharply less than the 66% who had said this last year. Sixty-five percent said the number of options had stayed the same, compared with 27% in 2017, and many more advisers this year—25% vs. 8% in 2017—said the options had decreased.

With discussion of participants’ poor saving behaviors and lagging retirement readiness pervading the retirement industry, many advisers expressed at least some doubt that their clients’ workers will achieve retirement income goals by age 65. While 8% and 27% of advisers said they are “very confident” or “confident,” respectively, that their participants will achieve their desired retirement income by their intended retirement date, 44% said they are just “somewhat confident,” 16% said “only a little confident,” 4% said “not at all confident,” and 1% said “unsure”—a total of 65% less than confident.

It is not surprising then that more advisers (13%) project that retirement income discussions with clients’ participants will be their “most significant growth strategy” next year; figures for that category rose 6 percentage points from 2017.

Other areas advisers plan to focus on developing in 2019 include participant advice/education (27%), nonqualified deferred compensation (NQDC) plans (21%), plan/fee benchmarking (18%), other workplace benefits (16%), and defined benefit (DB) plans (15%).
 

Art by Katherine Streeter