Switching Your Advisor Could Be the Answer

Switching your advisor might be what your plan participants need!  Nearly half of 401(k) plan sponsors are considering replacing their incumbent service providers.  Switching your advisor seems pretty popular this year and next.  Specifically, 47% of plan sponsors are thinking of switching to a new financial advisor.  And, 48% are considering a new recordkeeper relationship, according to the 13th edition of Fidelity Investments’ Plan Sponsor Attitudes Study.

It seems 2022 is a big year for sponsors seeking to make changes to their retirement plans.  Among the plan sponsors that Fidelity surveyed, 88% are planning to make changes to their 401(k) plan design, and 93% intend to revise their investment menu.  The percentage of sponsors planning investment lineup changes in 2022 increased in 14 of the 16 categories presented in the survey.  This demonstrates that plan sponsors are seeking better options, service, and outcomes for participants.  Switching your advisor may be one of those needed changes.

“Plan sponsors are continuously seeking more expertise from their plan advisors year-over-year to help them in a more diversified capacity and are not afraid to look elsewhere if a competing advisor offers a better experience,” said Liz Pathe, head of Defined Contribution Investment Only (DCIO) Sales at Fidelity Institutional.  “With such strong activity this year, it increases the expectations and pressures surrounding this space.”

Advisor satisfaction hit a five-year high (76%); despite this, a surprising 47% of sponsors are actively seeking a new advisor.  The top reasons for the switch were the need for better employee education and communication, a better investment lineup, and a need for an advisor who can deal effectively with recordkeeper issues.  Plan participants stand to be the big-winners in such a switch.

Generally speaking, plan sponsors are seeking advisors with more well-rounded expertise.  Slightly more than half (51%) want an advisor who can make proactive suggestions for improving plan performance.  Plan sponsors are paying attention, though, despite there being a notable increase in advisor solicitations this year, Fidelity found.  Prospecting advisors caught plan sponsors’ attention with 401(k) plan knowledge, lower costs, and assistance with fiduciary responsibilities.  In addition, 91% of plan sponsors reported that advisors were critical in recruiting and retaining talent by helping to promote the retirement plan to existing and prospective employees.

A majority of plan sponsors (93%) intend to make investment menu changes in 2022, including expanding the number of sustainable or environmental, social, and governance (ESG) funds (27%); increasing the number of investment options (27%); and increasing the number of managed account options offered (26%).

According to the survey, sponsors are highly satisfied that plans are meeting their goals, with ratings hitting multi-year highs especially among advised plans (76% satisfaction rating vs. 65% for non-advised). Almost one-quarter (22%) of plan sponsors measure their plan’s success based on the benchmark of industry standards for employee participation/savings rate goals, while others use metrics such as employee happiness (19%) and participation levels (13%).  Moreover, 70% of plan sponsors believe employees are saving enough for retirement, with 64% believing the auto-enrollment deferral rate/company match are a sufficient retirement savings rate (up from just 46% in 2018).

Choosing a retirement plan advisor is one of the most important choices plan sponsors make.  If you’re considering switching your advisor, be sure to ask interview questions that reveal their fee structure, expertise, and ability to improve your plan and participation rates and outcomes.  The right advisor should be able to provide valuable fiduciary guidance and help you achieve your plan’s goals.  Don’t settle, and make sure your advisor is delivering the services, value, and experience your plan and participants require.


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