62% % % % Plan Sponsor Attitudes 5th Edition Survey Results. Find new opportunities

Transcription

1 Plan Sponsor Attitudes 5th Edition Survey Results Trends and opportunities in the DC market Find new opportunities Fidelity s Plan Sponsor Attitudes Survey uncovers trends and insights that can help advisors understand the needs and concerns of plan sponsors. Survey results reveal areas for improvements that address sponsor concerns, including: Plan design Investment menu selection Participant retirement income Cost management Plan sponsor engagement A majority of sponsors continue to rely on advisors of all respondents are using an advisor 90% or plan consultant up 6 points from Satisfaction with the advisor also continues to improve, with nearly two-thirds reporting high satisfaction with their advisor or consultant. Fidelity s proprietary plan sponsor survey Based on responses of 897 plan sponsors who use a wide variety of recordkeepers not just Fidelity Plan sizes from 25 to 10,000 participants Plan assets from start-ups to over $100 million Focused on plan sponsors using a financial advisor or plan consultant Respondents were responsible for managing their organization s 401(k) plan and represented a variety of different roles within the company: 60% CEO, CFO, or Head of Human Resources 71% Make the hiring decision for the plan s advisor 70% Choose plan features or make design decisions Sponsor satisfaction 57% % 2012 Responses were across all plan sizes. 62% % % Directly involved in managing plan costs 58% Determine the plan s investment lineup Plan sponsor survey information was based on extensive research developed by Fidelity and fielded in March 2014 by an independent market research firm on behalf of Fidelity. Previous Fidelity surveys were conducted in 2008, 2010, 2012, and For Investment Professionals and Plan Sponsors only. Not FDIC Insured May Lose Value No Bank Guarantee

2 New insights for improving plan sponsor satisfaction For the first time, we examined which plan-related activities actually improved plan sponsors satisfaction with advisors and to what degree. It is important to align the services of a plan advisor from defining plan goals to measuring success with plan sponsors expectations. Most important: Items that were important tasks and drove higher satisfaction scores Middle tier: Items that were also important tasks but did not drive the highest satisfaction scores Expected services: Services sponsors expect from advisors they do not drive higher satisfaction but will hurt satisfaction if they fail to deliver Performance information Employee education Plan metrics Want a better understanding of how well the plan is working for employees Day-to-day plan support Plan design and administration Guidance on employee communication Consult on fees and fiduciary concerns 100% of plan sponsors that gave their advisor a high score on plan metrics were very satified or highly satisfied with their advisor. Responses were from plan sponsors with 25 to 2,500 participants. 2

3 Plan performance correlates with plan sponsor satisfaction The 2014 survey results demonstrate that plan sponsors are still very proactive managing plans and will change advisors if their needs are not being met. The place where advisors may find the best opportunity to help plan sponsors is in improving plan performance. Satisfaction that the plan is meeting company goals has declined to a low of 47%. As satisfaction with the plan declines, sponsors may be looking for more plan expertise and involvement from their advisor. The #1 reason for a plan sponsor changing their advisor is the need for a more knowledgeable advisor. The top three goals of plan sponsors using an advisor are: Preparing employees for retirement 37% Reducing business costs related to the plan 28% Using the plan to attract new employees 24% A well-designed plan can help sponsors address each of these primary concerns while helping participants save at a rate appropriate to ultimately optimize their income in retirement.

4 5 key ways advisors can help plan sponsors 1 2 Help participants save more by improving plan design say participants 54% do not save enough Plan sponsors are more actively looking to make plan design changes in the near future, with this percentage increasing during each survey year, from 35% in 2012 to 68% in Consider using auto-enrollment and automatic annual increase programs to help improve overall plan participation and saving rates. Thirty-three percent of plan sponsors did not implement a design change due to perceived negative feedback from participants. However, Fidelity recordkeeping data shows that most participants will accept plan default elections such as auto-enrollment, automatic annual increase, and default investment elections. For example, opt-out rates were not higher when the default deferral rate was 6% instead of 3%.* Help plan sponsors measure progress toward retirement goals 66% of sponsors have no formal goal for participant savings whether for a specific saving rate now or to achieve adequate retirement income later. Fidelity believes all plans should be structured to target a specific retirement income replacement rate goal for participants. Fidelity suggests approximately 50% as a goal for defined contribution plans. Define plan success in a new way by demonstrating participants progress towards reaching retirement income goals. Help set plans on a path to success by providing automated plan saving strategies. Redefine success Help design plans to target a retirement income replacement rate for participants. Advisors can demonstrate their value by measuring progress toward this new goal. * Fidelity Building Futures data, as of 6/30/

5 3 4 Provide plan sponsors and participants with the investment expertise they need of sponsors review plan investments 96% with their advisor at least annually, and 58% ranked as very important the advisor s willingness to take on formal fiduciary duties.* A need for investment expertise is the reason a majority of sponsors begin working with an advisor. Investment changes are prevalent, with 63% replacing an underperforming fund. Contrary to popular belief, more sponsors report adding, rather than decreasing, investment options. Half of plan sponsors added investment options, while about a third reduced options. Additionally, while 85% of advisors provide investment-related guidance to participants, 38% of sponsors state they would also welcome guidance to participants outside of the plan. 5 Help sponsors manage plan-related costs 39% do not clearly understand costs Work with sponsors to help understand both what drives plan-related costs and sponsors preferences as to how these costs are covered. New this year 17% favor a zero revenue sharing option for their plan s mutual fund selections. Help sponsors understand that delaying retirement affects them have participants who delay 58% retirement due to a lack of savings, and 78% of workers age 50+ cite the need for money or insurance as their primary reason for working. AARP.org, Older workers employment benefits, June Help sponsors understand how a well-structured plan can help participants save enough to retire when they want to. Delaying retirement creates potentially higher costs for the sponsor and also may limit advancement opportunities for younger workers. * Investment professionals should consult with their firm s legal and/or compliance professionals before taking on fiduciary duties, such as selecting and monitoring plan investment options, as certain restrictions may apply. PLAN SPONSOR ATTITUDES SURVEY RESULTS: FIFTH EDITION 5

6 Plans are in motion Between 2010 and 2015, about $1.3 trillion in plan assets is estimated to be in motion due to a change of plan providers; over half of that total is from plans with fewer than 5,000 participants. 1 Our findings suggest that changes in provider and financial advisor do not go hand in hand. In fact, only 49% of plan sponsors who switched advisors also made the decision to change plan providers. Sponsors are personally solicited for plan business five times a year on average. Sales pitches catch the interest of the plan sponsor about 35% of the time, with ideas for improving plan performance and reducing costs being well received. 1. Data about plans in motion and marketplace size estimates are from McKinsey & Company, Winning in the Defined Contribution Market

7 Retention insights The trends uncovered in the Fidelity survey provide valuable insights that can help advisors retain the business they worked hard to win. Showcase your efforts and demonstrate your value 66% of plan sponsors, a new high, report they are getting good value from their advisor. However, only 18% said their advisor is very good at proving their value to the plan. It is important for advisors to report regularly to plan sponsors in order to reinforce their value to the plan. Many advisors fail to demonstrate their value by not reporting: Time spent working on the plan Progress made on plan performance measures Activity performed on behalf of the plan Here is an actual response from a plan sponsor when asked why they scored satisfaction with their advisor highly. We felt they understood our industry, our employees, and had a solid vision for evolving our plan. * * This sponsor s experience is no guarantee of future success and may not reflect the opinion of other plan sponsors. PLAN SPONSOR ATTITUDES SURVEY RESULTS: FIFTH EDITION 7

8 Put Fidelity s expertise to work for you. Investment and retirement leadership to augment the success of a plan A comprehensive lineup of institutional investment strategies to help meet a plan s investment goals Expertise and resources to support defined contribution professionals To learn more, visit advisor.fidelity.com. Totals may not add up to 100% due to multiple answer options. IMPORTANT: All data and information are from the following sources unless otherwise specified: Survey summary: E-rewards, an independent market research company, conducted an online survey of 897 plan sponsors on behalf of Fidelity in March Respondents were identified as the primary person responsible for managing their organization s 401(k) plan (ranging in size between 25 and 10,000 participants), and the survey focused on those plan sponsors (approximately 90%) using the services of a financial advisor. Fidelity Investments was not identified as the survey sponsor. The experiences of the plan sponsors who responded to the March 2014 survey may not be representative of those other plan sponsors who use the services of an advisor. Building Futures, data as of 6/30/2014. Based on Fidelity analysis of 21,200 corporate defined contribution (DC) plans (including advisor-sold DC) and 13 million participants as of 6/30/2014. Fidelity s recordkept database of DC plans excludes tax-exempt plans, nonqualified plans, and the FMR Co. plan. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee. For investment professional and plan sponsor use only. Not for use with plan participants. Third-party trademarks and service marks are the property of their respective owners. All other trademarks and service marks are the property of FMR LLC or an affiliated company. The information provided herein is general and informational in nature and should not be construed as legal advice or opinion. Keep in mind that investing involves risk, including the risk of loss. Investment decisions should be based on an individual s own goals, time horizon, and tolerance for risk. Before investing, consider the funds investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, or a summary prospectus if available, containing this information. Read it carefully FMR LLC. All rights reserved FIDELITY INVESTMENTS INSTITUTIONAL SERVICES COMPANY, INC., 500 SALEM STREET, SMITHFIELD, RI