There is no doubt that automatically enrolling workers into their retirement plan has increased the number of retirement plan
participants. However, only 41.1% of plan sponsors across all plan sizes auto-enroll employees,
according to the 2016 PLANSPONSOR Defined
Contribution (DC) Survey. Furthermore, when
they do practice this strategy, 45.0% of sponsors
defer a mere 3% of participants’ salary.
Considering those dynamics, some advisers
and sponsors are beginning to challenge the
conventional wisdom regarding the “be-all” of
automatic enrollment and are seeking out ways
to get participants actively engaged with their
plans and taking a vested interest in their lives post-retirement. In “
Reconsidering the Status Quo” (page 24), we look at how helping people solve
their financial concerns today can get them to a place where they can save
adequately for the future.
Our research in this issue is the 2016 PLANADVISER Recordkeeper Services
Guide (page 30), complemented by a feature on developments in the recordkeeping industry—“Thorough Analysis” (page 28). Some industry experts
predict that the fiduciary rule will prompt broker/dealers (B/Ds) to reduce
the number of recordkeepers they work with, which could lead to further
consolidation in the recordkeeping industry and affect the choices available
to your clients.
“Reviewing Providers” (page 38) reveals that an adviser’s job isn’t done
when he assesses fees. It’s also important to analyze these fees in the context
of the services being offered. Are the providers meeting the needs of each
plan’s participant base? The adviser should be periodically issuing requests
for information (RFIs) and requests for proposals (RFPs) to learn about new
services that providers have developed that could be useful to their plan
sponsor clients. He also should be asking each provider to underscore what it
believes is unique about its services.
While 66.6% of defined contribution plans use a target-date or risk-based
lifestyle fund as their default investment, according to the 2016 DC Survey,
“Default Thinking” (page 44) reveals how some plan sponsors are considering
managed accounts for their QDIA, particularly for their older participants.
Lower cost TDFs may serve younger participants, who have relatively small
account balances, advisers are finding, but for those approaching retirement,
the personalization of a managed account may be a better solution. Still, only
6.9% of plans use one of these as the QDIA.
In writing “The Best Path Forward” (page 48), I spoke with advisers who
focus on the micro market—i.e. plans with $10 million of assets or less—who
are very content to remain in that market. They feel they make more of an
impact on the plans they serve, they said, and like the strong relationships
they form with the sponsors and participants. They also said the fiduciary
rule is creating tremendous sales opportunities for them. With the majority
of retirement plans fitting into that micro space, the potential for new clients
seems endless for advisers.
We hope you find these stories illuminating and would love to hear back
from you about how they impact your practice. —Lee Barney, Managing Editor
Rules of Engagement
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Quo RECONSIDERING the STATUS It takes more than automatic enrollment o valuably increase participation and engagement