When insurance firms launched social media initiatives, the results were rewarding.
By Cyril Tuohy
A new survey by the U.S. tax and consulting company McGladrey finds there’s still plenty of growth potential for advisors serving the retirement plan market, particularly around clarifying retirement plan costs, as many employers are still underpenetrated in terms of using advisors for plan design, cost analysis and fiduciary advice.
The survey found that 82 percent of employers use outside advisors in some form. Among companies that do, 77 percent hire outside advisors for plan design, 40 percent hire them for investment advisory co-fiduciary services, and 35 percent hire advisors to help companies with vendor selection.
The bigger the company, the more likely it is to use a retirement plan advisor, the survey also found. A full 100 percent of companies with 5,000 employees said they use an outside retirement plan advisor, the survey found.
By contrast, only 76 percent of companies with fewer than 50 employees said they used the services of an outside retirement plan advisor.
“Although employers may not be using third-party advisors or consultants to their full capacity for plan cost analysis, they do understand the importance of third parties for overall plan decisions,” the report said.
Many employers said they don’t understand plan costs. A full 31 percent saying they didn’t understand costs even after receiving the disclosures -- an increase of 15 percentage points over last year, the survey found.
In addition, 38 percent of employers with 50 or fewer employees said they do not “fully understand” plan costs, compared with only 8 percent of companies with 5,000 or more employees, who don’t understand plan costs.
Companies use retirement plan advisors for different functions. There’s little consistency between company size and the likelihood of using an advisor for one function or another.
A total of 63 percent of companies with between 51 and 200 employees who use advisors for plan design, for instance, while 76 percent of companies with between 501 and 1,000 employees use advisors for plan design.
The survey found that 57 percent of companies with more than 5,000 employees use advisors for cost analysis or to help manage retirement plans, while 71 percent of those companies use an advisor or vendor selection, the survey found.
The report analyzing compensation, retirement and benefits trends was derived from an online survey of more than 1,000 companies in a range of industries. The survey was conducted by McGladrey and the retirement plan consulting company Verisight.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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