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Fewer Plans Looking to Switch Advisors

Fidelity’s burgeoning DCIO group recently released a study of 1,000 plan sponsors with 25-10,000 participants about their satisfaction with their plan advisors. Though 10% of plan sponsors are actively looking to replace their current advisor and 38% are less than satisfied, those numbers have declined in the past four years — signaling the start of a maturing of the market like that experienced by record keepers 10 years ago. In 2008, 17% of plans were looking to change their advisors (14% in 2012) and 45% were less than satisfied.

Record keeper satisfaction has continued to rise over the past 10 years as a result of better service and technology — as well as consolidation, with fewer weak sisters in the market. Advisor consolidation will take a different form. Though the number of experienced plan advisors (estimated at 5,000 out of the 150,000 who manage at least one DC plan) is expected to grow based on more demand from the 16% of plans without an advisor (as well as increased plan sponsor sophistication), more of these advisors will join teams rather than go it alone. Witness the growth of specialty firms like CapTrust, Sageview and 401(k) Advisors, as well as other firms like Pensionmark and Sheridan Road.

Other key takeaways from the Fidelity survey:

• Plans are solicited an average of four times a year.
• Referrals are the dominant ways that plan sponsors find an advisor.
• Costs are still the major way to catch a prospect’s attention, followed by plan improvement and administrative help.
• 70% of plans switched funds last year.
• Services most valued are investment performance analytics, employee education and plan health reviews.

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