Retirement Specialist Advisers Do More for Plan Sponsors

More than six in 10 (61%) retirement plan sponsors with plan assets between $5 million and $500 million work with a financial adviser or consultant who is exclusively or primarily focused on retirement plans, according to a study produced by EACH Enterprise for the benefit of the Retirement Advisor Council and co-sponsored by Fidelity Investments, Franklin Templeton Investments, John Hancock Investments, MassMutual Financial Group, MFS Investment Management, Principal Financial Group, and Transamerica Retirement Solutions. Plan sponsors consistently cite their professional retirement plan advisers as being central to the success of the plans they manage, the research finds.

The study, “The Value of a Professional Retirement Plan Advisor,” defines professional retirement plan advisers as those whose book of business is filled primarily or exclusively with retirement plans. Stig Nybo, president of U.S. retirement strategy at Transamerica Retirement Solutions, says these specialist advisers often earn high marks because they deliver stronger levels of expertise and knowledge about challenging retirement-related issues than generalist investment advisers.

The study makes the case that retirement specialist advisers do a better job retaining retirement plan clients for the long term than generalist advisers or benefits brokers. More than 80% of plans that partner with an adviser entirely dedicated to retirement plans have worked with their current adviser for at least five years. Strong accomplishments related to boosting plan outcomes and simplifying administration undoubtedly play a role in the length of these relationships, Nybo says.

Another factor is the standard use of a formal request for proposal (RFP) process by sponsors in selecting new retirement plan advisers. The study found that more than 65% of plan sponsors have conducted an RFP search for an adviser for their plan within the last 10 years. Researchers explain that retirement specialists can often demonstrate greater expertise and client service capabilities during the RFP process, allowing them to win and retain business more effectively.

While generalist financial advisers often bring powerful investing knowledge to the table, Nybo says it’s the specialist advisers’ additional ability to simplify plan administration and boost participant outcomes that sets them apart. For example, sponsors appear to be especially interested in hiring advisers who can help implement creative and compliant plan design adjustments, according to the study.

Nybo says specialist advisers are being called on to support everything from changes in the employer match formula to the implementation of automatic enrollment. They are also usually skilled at helping sponsors increase deferral rates through financial wellness education and innovative plan design changes, he adds.

“Importantly, their efforts often translate into measurable improvements in plan performance and retirement outcomes, and the survey results make it clear that plan sponsors recognize the value of partnering with a retirement plan adviser,” Nybo says.

In addition to planning and executing effective plan design changes, specialist advisers also provide better visibility into important plan analytics, according to the research. The study suggests new reporting tools supplied by advisers at the participant and plan level have made it easier for plan sponsors to understand how plan design characteristics impact overall plan performance. A majority of plan sponsors that work with a specialist adviser reported positive results coming out of more advanced technology tools and other adviser support efforts (see “Plan Design Meets Big Data”).

Among those sponsors working with specialist advisers, 76% say more than half their participants are on course to achieve a successful retirement. More than 80% have experienced an improvement in participant deferral rates, and 33% reported a deferral increase of at least 6% in the last two years.

Further, 90% of plan sponsors agree that their specialist adviser simplifies plan administration, and when challenges arise, nearly 60% say they turn to their adviser first in the event of a problem with plan administration.

The researchers also conducted a series of focus group discussions with 14 plan sponsors as part of the study. Fully half of these sponsors indicated they had chosen their current adviser based on the role of the adviser in participant education, communication and financial wellness counseling. The other 50% of plan sponsors based their decision on a range of other factors, including the scope the adviser’s fiduciary services, approach to qualified default investment alternatives in the investment policy, compensation structure, and business affiliation.

The research urges sponsors to consider plan needs and demographics in choosing which criteria will be important during the adviser search. For specialist advisers, it's key to stay on top of plan design innovation and best practices for boosting and measuring participant outcomes. 

The research was conducted by EACH Enterprise, LLC, an independent firm specialized in retirement plan research whose clients include retirement plan service providers and investment managers. EACH Enterprise administered the survey among employers in the private sector (privately-held, exchange-traded, and not-for-profit) with 100 employees or more. Respondents also had 401(k) or 403(b) plan sponsors with plan assets in the $5 million to $500 million range.