Plan sponsors happy to pony up for adviser help, survey shows

Retirement plan sponsors clearly see value in retirement plan advisers, so much so that they're willing to pay for the help.

According to the Morgan Stanley at Work Value of the Financial Advisor study, 95% of plan sponsor respondents said the fees associated with a plan adviser are well worth the cost given the investment management (28%), fiduciary guidelines (67%) and compliance (75%) considerations.

Plan sponsors usually hire investment advisers to recommend an investment or course of action for one or multiple retirement plans. Advisers to 401(k) plans are compensated one of two ways: direct payment from the employer or indirect payments out of plan assets.

Plan sponsors also think retirement plan advisers boost retirement outcomes, according to the report, with 87% of plan sponsors saying as much. Furthermore, nearly 45% of plan sponsors that use a plan adviser noted that 75% to 100% of eligible employees are enrolled in their company’s 401(k), versus only 33% of plan sponsors that don't have a plan adviser.

As one might expect, the top reason that plan sponsors give for working with a plan adviser is to provide oversight of investment management, which was cited by 28%. Moreover, an overwhelming number of plan sponsors (88%) say that a plan adviser offers a wider range of investment options.

Finally, the survey’s respondents appreciated the added features that come with engaging a plan adviser, including automatic match, match options and auto enrollment, all of which better engage participants and increase retirement savings.

“I find that plan design has a surprising impact on employee financial security — especially for average employees with less investment experience and access to professional help outside of an employer-sponsored plan,” said Michael Finke, professor at the American College of Financial Services. “A professionally designed plan with high-quality investments, auto-enrollment, a higher default savings rate, automatic matches and escalation can give average workers a much better chance to meet their retirement savings goals.”

“Consumer surveys highlight the need among workers for greater retirement income clarity, and the lack of clarity leads to anxiety and savings paralysis," Finke added. "Using a professional adviser can help employees better understand how much they need to save to meet future goals, how to invest appropriately, and when they have enough to retire comfortably.”

Morgan Stanley at Work's study was based on proprietary, third-party research and a survey conducted by Rebel & Co. of 350 plan sponsors at U.S.-based companies in various industries that have from 20 to 3,000 employees and offer financial benefits including a 401(k) plan.