A new survey finds that plan sponsors who use RIAs are more likely to hold their fiduciary duties to a higher standard, and that RIAs are significantly more likely to provide certain services to retirement plans than other advisors.
According to TD Ameritrade Institutional’s 2015 Plan Sponsor Sentiment Survey, RIAs are significantly more likely than other advisors to provide the following services:
- one-on-one participant advice (50% vs. 29%)
- fiduciary support (43% vs. 23%)
- plan sponsor education (40% vs 27%)
Additionally, the survey found that RIAs are 64% more likely to offer general investment advice, 60% more likely to advise on plan selection and design and 34% more likely to handle enrollment. However, only 28% of plan sponsors use an RIA, and one in four plan sponsors that do not use an RIA say they have never been approached by one.
Most Important Services
According to the survey, plan sponsors say performance reporting, participant advice and fiduciary education are the most valuable support services.
Not surprisingly, lower plan fees (34%) and more diverse investment choices (28%) are top reasons to switch providers. Fees (27%) was also the top concern with their current plan. On the other hand, just over half (53%) of plan sponsors are unsure whether their plans offer funds with the lowest fees in their respective share classes (10% were not very/not at all confident). Sixteen percent say they either definitely or probably will change providers in the next 12 months, while 44% say they might or might not do so.
2016 Goals
Plan sponsor respondents’ top goals for 2016 are to evaluate plan investment choices (51%) and encourage participation (49%), though keeping pace with changing regulatory requirements was close behind (45%), and managing plan fees was cited by 41%. Their biggest concern? Diversity of the plan’s investment lineup.
There are, however, some blind spots. Nearly two-thirds (62%) do not fully understand the DOL’s fee disclosure regulation. And while more than half (52%) that use RIAs say their RIAs are sending them information about their fiduciary responsibilities, and two in five are getting education on participant fee disclosure.
Fifteen percent of plan sponsors have not heard of the DOL’s fiduciary proposal; another 17% have heard about it but were not at all knowledgeable about its implications. One in four have done nothing at all to understand the rule better. Indeed, the survey found that plan sponsors are largely ambivalent about the rule’s potential benefits or impact: Fewer than half agree that it will benefit plan participants, and only 36% agree that ERISA compliance will get easier.
TD Ameritrade Institutional’s 2015 Plan Sponsor Sentiment Survey was conducted by phone, questioning 242 retirement plan sponsors between Sept. 28, 2015 and Oct. 6, 2015. Survey respondents had at least 25 employees from the public and private sectors and self-identified as the primary or shared decisionmaker for their organization’s retirement plan.
