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Survey says… How does your retirement plan stack up?


How do we stack up? That’s the one question that many advisors are asked over and over by plan sponsors. Everyone wants to know how their plan compares to others and, more importantly, what steps should be considered to improve the plan.

Although we have developed a best practices program for advisors who work with plan sponsors, we remain committed to staying apprised of the latest trends. The Callan Institute conducts timely research, and its annual survey is widely followed and helps advisors and plan sponsors keep abreast of best practices and the most important developments in the industry.

Callan’s most recent Defined Contribution (DC) Trends Survey incorporates responses from 106 DC plan sponsors, including both Callan clients and other organizations. As in prior surveys, the majority of respondents offered a 401(k) plan as the primary DC plan, and more than 90% of plans in the survey had over $100 million in assets, with more than 62% classified as “mega plans” (with more than $1 billion in assets).

So admittedly, the Callan survey focuses on the largest segment of the market, but advisors serving smaller plan sponsors should not be disinterested. Rather, we believe practices that typically begin at the upper end of the market eventually migrate down into the midsized and smaller plans. It definitely matters what these mega plans are doing, and there is much to be learned from them.

So what does the survey say? The following are a few of the top takeaways from Callan’s 2019 Defined Contribution (DC) Trends Survey:

  1. All about fees: Defined contribution plan sponsors are continuing their intense scrutiny of fees. Participants paid all investment management fees in more than three-quarters of plans in the survey (and nearly always paid at least a share of the fees). However, there was a significant drop in the percentage of plans in which participants paid all administrative fees, down from 63% in 2017 to 33% in 2018. Some shifting of costs appears to be afoot, and it will be interesting to see how this changes going forward, particularly since slightly more than half of plan sponsors are likely or very likely to conduct a fee study in 2019. Stay tuned. And for more information on fee transparency, check out Fees in focus.
  2. Participant communication matters: In addition to fees, a focus on participant communications and financial wellness ranked among the top three priorities from respondents. Unsurprisingly, for the second year in a row, financial wellness ranked as the number one upcoming area of communication focus. The importance of communication (and education) with participants cannot be overestimated (which is why we created Knowledge is power), and anything that advisors can do to help their plan sponsors along these lines is value-added. This includes offering access to basic financial education and budgeting tools for financial planning.
  3. Fiduciary focus: Survey respondents reported that the most important action plan sponsors took within the past year was to improve the fiduciary position of their DC plan. Again, a key component of this is fees, not surprisingly. Beyond this, the next most important steps undertaken were related to implementing, updating, or reviewing the investment policy statement. Retirement Matters includes three checklists that can help you stay on top of your fiduciary responsibilities.

The Callan survey offers a wealth of information that touches on numerous other subjects as well, including ways to measure plan success, fee policy and the use of consultants, automatic features built into funds, and the use of target date funds, among others. We encourage you to review all the key findings and see how your clients’ plan measures up.