Home / INVESTMENTS / Fidelity Survey: Most Plan Sponsors Remain Highly Satisfied with Their Plan Advisors, but about One-Third May Be at Risk

Fidelity Survey: Most Plan Sponsors Remain Highly Satisfied with Their Plan Advisors, but about One-Third May Be at Risk

BOSTON–(BUSINESS WIRE)–Fidelity Investments® today announced the results of its
eighth annual Plan Sponsor Attitudes survey, which revealed that the
large majority of plan sponsors (65 percent) are highly satisfied with
their plan advisors. However, a record number of plan sponsors are
actively looking to switch their plan advisors (38 percent, up from 30
percent last year). The study, which began in 2008, surveyed employers
who offer retirement plans that use a wide variety of recordkeepers and
have at least 25 participants and $10 million in plan assets.1

“This is not a time for plan advisors to rest on their laurels. While
most plan sponsors remain satisfied with their advisors, they are
raising their expectations,” said Jordan Burgess, head of specialist
field sales overseeing defined contribution investment only (DCIO) sales
at Fidelity Institutional Asset Management®. “For some
advisors, this could put their business at risk. For others, this could
be an opportunity to win new clients.”

“Successful plan advisors are those who are aware of their dual mandate:
to help plan participants achieve their retirement outcomes, as well as
to support plan sponsors with the challenges associated with offering a
defined contribution plan and other employee benefits,” added Burgess.

Reducing business costs related to having a plan is the top concern for
plan sponsors, with 31 percent citing it as an area of focus. Other
important themes for plan sponsors include managing their fiduciary
responsibility (23 percent), preparing employees for retirement (22
percent) and the risk of litigation and liability (18 percent).

The research also highlighted the competing priorities and challenges
employers face when allocating time, budget and resources to providing
benefits to their employees. In terms of overall benefits, the plan
sponsors surveyed report that health care ranks No. 1, before retirement
benefits in order of importance. Two-thirds of the plan sponsors
surveyed (67 percent) agree that increased health care costs have
resulted in reduced spending on other benefits, an increase from 64
percent in 2016 and 60 percent in 2015.

Plan Sponsors Active in Making Changes
The study found that
plan sponsors are making more plan design changes than ever before. Plan
design activity continues to increase and reached a new high at 92
percent, with plan advisors seen as the primary influencer of these
changes. Importantly, 79 percent of plan sponsors reported that
participants were satisfied with the changes.

Auto-enrollment, which can improve participation rates from an average
of 50 percent to 86 percent2, continues to be the most
popular change, with 42 percent of the plan sponsors surveyed having
introduced the feature in the past two years. More than two-thirds of
the respondents (68 percent) said their participants were satisfied with
auto-enrollment.

Delivering Value by Sharing Retirement Expertise
As the
number of plan sponsors searching for new advisors hits a record high,
plan advisors can strive to differentiate themselves from the
competition by educating sponsors and participants on income replacement
goals and helping improve savings rates:

  • Income Replacement: The study found that the majority of plans
    (71 percent) have an income replacement goal. However, while Fidelity
    suggests that plans should aim for a 45 percent income replacement
    rate in retirement years, only 25 percent of sponsors identified an
    income replacement goal between 25 and 50 percent. This underscores a
    need for advisors to help set goals for retirement income based on
    these best practices.
  • Savings Rates: The study revealed that 59 percent of
    plan sponsors believe their default deferral rate plus company match
    will provide sufficient savings for participants to retire. Yet,
    eight in 10 plan sponsors said they have employees who would delay
    retirement due to a lack of savings, exacerbated by increasing medical
    costs in retirement – estimated at $275,000 per couple.3
    Additionally, about six in 10 said that a quarter or more of their
    workers leave the workforce early due to reasons beyond their control.
    Given these considerations, advisors could help sponsors consider the
    impact early or late retirement can have on their business and
    identify tactics to improve plan participant savings rates.

Additional information on the survey as well as resources and tools –
including fund analytics and details on investment options – can be
found at go.fidelity.com/attitudes.

Fidelity Institutional Asset Management®,
Defined Contribution Investment Only (DCIO)

Fidelity
Institutional Asset Management® is a leading provider of
investment management and retirement services to defined contribution
professionals nationwide, supporting advisors, recordkeepers,
third-party administrators and plan sponsors in a collective effort to
help participants achieve better retirement outcomes. As a retirement
leader, Fidelity has deep knowledge of plans and participant behaviors.
The firm combines this knowledge with a legacy of asset management —62
percent of Fidelity’s $2.3 trillion in managed assets are retirement
assets as of June 2017— to become a key manager in the investment-only
arena with about $77.5 billion in total DCIO assets.

Plan Sponsor Attitudes Survey: Methodology
The
2017 Plan Sponsor Attitudes Survey was conducted in collaboration with
the eRewards panel from Research Now, an independent market research
company, which conducted an online survey of 1,106 plan sponsors on
behalf of Fidelity during February and March 2017. Respondents were
identified as the primary person responsible for managing their
organization’s 401(k) plan (with at least 25 participants and $10
million in plan assets), and the survey focused on those plan sponsors
(890, or approximately 80%) using the services of a financial advisor or
plan consultant. Fidelity Investments was not identified as the survey
sponsor. The experiences of the plan sponsors who responded to the
survey may not be representative of those other plan sponsors who use
the services of an advisor. Previous Fidelity surveys were conducted in
2008, 2010, 2012, 2013, 2014, 2015 and 2016.

About Fidelity Investments
Fidelity’s
mission is to inspire better futures and deliver better outcomes for the
customers and businesses we serve. With assets under administration of
$6.3 trillion, including managed assets of $2.3 trillion as of July 31,
2017, we focus on meeting the unique needs of a diverse set of
customers: helping more than 26 million people invest their own life
savings, 23,000 businesses manage employee benefit programs, as well as
providing more than 12,500 financial advisory firms with investment and
technology solutions to invest their own clients’ money. Privately held
for 70 years, Fidelity employs more than 40,000 associates who are
focused on the long-term success of our customers. For more information
about Fidelity Investments, visit https://www.fidelity.com/about.

The information contained herein is general in nature, is provided for
informational purposes only and is not legal advice. Unless otherwise
disclosed to you, any investment or management recommendation in this
document is not meant to be impartial investment advice or advice in a
fiduciary capacity, is intended to be educational and is not tailored to
the investment needs of any specific individual. Fidelity and its
representatives have a financial interest in any investment alternatives
or transactions described in this document. Fidelity receives
compensation from Fidelity funds and products, certain third-party funds
and products, and certain investment services. The compensation that is
received, either directly or indirectly, by Fidelity may vary based on
such funds, products and services, which can create a conflict of
interest for Fidelity and its representatives. Fiduciaries are solely
responsible for exercising independent judgment in evaluating any
transaction(s) and are assumed to be capable of evaluating investment
risks independently, both in general and with regard to particular
transactions and investment strategies.

The 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.

Products and services provided through Fidelity Institutional Asset
Management® (FIAM®) to investment professionals,
plan sponsors and institutional investors by Fidelity Investments
Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI
02917.

Fidelity Clearing & Custody SolutionsSM provides
clearing, custody, or other brokerage services through National
Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE,
SIPC. 200 Seaport Boulevard, Boston, MA 02210.

814180.1.0

© 2017 FMR LLC. All rights reserved.

1 Data presented here is based on the full 2017 survey
results. Other published or historical data may reflect different values
based on the criteria used, such as plan asset level or participant
count.
2 Building Futures, data as of December 31, 2016.
Based on Fidelity analysis of 21,600 corporate defined contribution (DC)
plans (including advisor-sold DC) and over 13.5 million participants as
of December 31, 2016. Fidelity’s recordkept database of DC plans
excludes tax-exempt plans, nonqualified plans, and the FMR Co. plan.
3
Fidelity Retiree Health Care Costs Estimate. Estimate based on a
hypothetical couple retiring in 2017, 65-years-old, with life
expectancies that align with Society of Actuaries’ RP-2014 Healthy
Annuitant rates with Mortality Improvements Scale MP-2016. Estimates are
calculated for “average” retirees, but may be more or less depending on
actual health status, area of residence, and longevity. Estimate is net
of taxes. The Fidelity Retiree Health Care Costs Estimate assumes
individuals do not have employer-provided retiree health care coverage,
but do qualify for the federal government’s insurance program, Original
Medicare. The calculation takes into account cost-sharing provisions
(such as deductibles and coinsurance) associated with Medicare Part A
and Part B (inpatient and outpatient medical insurance). It also
considers Medicare Part D (prescription drug coverage) premiums and
out-of-pocket costs, as well as certain services excluded by Original
Medicare. The estimate does not include other health-related expenses,
such as over-the-counter medications, most dental services and long-term
care. Life expectancies based on research and analysis by Fidelity
Investments Benefits Consulting group and data from the Society of
Actuaries, 2014.

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