Research from Cogent Reports, a division of Market Strategies International, covering plan sponsors and plan advisors shows a number of important new trends, including a dramatic increase in plan turnover and the continuing move to index funds by advisors.
Overall, 11% of all plans are expected to make a switch, with 40% considering a formal review. Past reports have indicated a much lower turnover rate, in the 4-6% range. Meanwhile, advisors have added more funds than they are using – bucking recommendations by behavioral finance gurus – while the number of record keepers they use remained stable.
More RK turnover and review could mean more opportunity for plan advisors, as well as an increase in advisor RFPs. It could also mean more RK consolidation, which is another pocket of opportunity – anyone remember Hartford in 2012?
While advisors are using fewer funds in their retail business, they are using more in their DC practice. Linda York at Cogent hypothesized that advisors are moving to more index funds as a result of 408(b)(2) and, rather than replace existing options, they are simply adding new ones.
The list of fund families which advisors indicated that they either started recommending recently or are considering dropping include:
| Firm | Recently Started | Recently Dropped |
| American Funds | 22% | 6% |
| Vanguard | 19%^ | 3% |
| BlackRock | 18% | 2% |
| Fidelity Investments | 12% | 4% |
| Franklin Templeton | 12% | 1% |
| J.P. Morgan Asset Mgmt. | 10% | 2% |
| OppenheimerFunds | 10% | 5%^ |
| Dodge & Cox | 10%^ | 2% |
| T. Rowe Price | 9% | 1% |
| PIMCO | 9% | 10%^ |
(Source: Market Strategies International. Cogent Reports: Retirement Planscape, September 2014.)
Noteworthy is Vanguard's jump from 12% in 2013 to 19% this year and Dodge & Cox, which increased from 3% to 10% over the same period. Though the survey was conducted in August 2014 – well before the stunning departure of Bill Gross – Pimco was already showing some vulnerability, with 10% of advisors indicating that they were likely to drop them compared with 4% last year.
