At the end of the second quarter of 2016, total assets in defined contribution plans hit $7 trillion, according to research from the Investment Company Institute and BrightScope.

That marked a new high for defined contribution plans, which are closing in on the assets held in IRAs, which was $7.5 trillion, the largest share of the $24.5 trillion total retirement market.

Within the defined contribution plan segment, 401(k) plans hold nearly $4.9 trillion. For the record-keepers looking to grow within that segment, the market is competitive, arguably crowded, and largely dependent on advisors who specialize in servicing 401(k) plans, according to new research from Cogent Reports, a division of the consultancy Market Strategies International.

“If advisors are not recommending your platform it’s clearly going to be difficult for 401(k) service providers looking to grow,” said Sonia Sharigian, senior product manager and the author of Cogent’s new "Retirement Plan Advisor Trends" report.

Cogent’s new data shows that on average, plan advisor specialists only recommend 2.2 plan providers to prospective clients. The report analyzes advisors’ brand loyalty to 34 record-keepers.

Perhaps more poignant: The report shows that nearly 40 percent of defined contribution advisors only recommend one record-keeper, a number that is up from 32 percent in 2015.

“When you stop and think about it, those are pretty sobering numbers for record-keepers,” said Sharigian, in an interview with BenefitsPro. “It shows just how tough it is for record-keepers to get consideration from the advisor specialists they need to grow their business.”

Cogent surveyed 508 plan advisors with varying levels of defined contribution business. So-called emerging advisors are managing less than $10 million in total defined contribution assets, while established advisors, which represent the bulk of the survey pool, advise on more than $10 million in assets.

Factors advisors keep in mind

Cogent also breaks out the sentiment of large-plan specialists managing over $50 million. For that group, advisors are recommending the most record-keeping platforms, at an average of 3.6. By contrast, the average emerging advisor is recommending 1.8 record-keepers.

Since 2012, advisors’ loyalty to preferred record-keepers has not changed much — five years ago advisors recommended an average of 2.3 record-keepers.

That consistency is telling, says Sharigian, who has been with Cogent for six years.

While earning the consideration of advisors remains a key challenge for record-keepers, the data also suggests that once relationships have been forged within specialty advisor channels, record-keepers are benefiting from ongoing relationships.

“Record-keepers have to nurture those relationships, just as any brand does with any consumer base,” said Sharigian.

In order to diagnose advisors’ thinking, the report breaks down the key attributes that drive advisors’ consideration of record-keepers.

The top consideration is the value record-keepers deliver relative to the price of their services.

“The best plan advisors are thinking of the best interests of plan participants,” said Sharigian. “There are a variety of levers record-keepers can use to engage advisors, but clearly, total value — which could mean anything from total fees, the level of support delivered to participants, and how the brand ultimately serves participants’ interests — is front of mind for advisors.”

Other top considerations for advisors are the ease they have in doing business with a record-keeper, the overall level of support given to advisors, strong fiduciary support practices, which Sharigian says can be expected to grow in importance in light of the U.S. Department of Labor’s fiduciary rule, and the overall reliability of a record-keeper.

This year’s report introduced the question of the value advisors place on record-keepers’ financial wellness programs, which for the time being, ranks lower on the list of advisor consideration, but can be expected to quickly grow in importance in coming years, says Sharigian. “The bottom line is that all of these services and support levels go a long way to breeding advisor loyalty to the platforms they recommend.”

This year’s report ranks the top five record-keepers advisors say are the easiest to do business with: American Funds, Fidelity Investments, John Hancock Financial Services, Vanguard, and Principal Financial Group held the top five spots (in the order they appear in the list).

And among the 34 record-keepers assessed in the survey, five emerged as offering the best value for the money: Vanguard, American Funds, Fidelity Investments, ADP Retirement Services, and John Hancock Financial Services.

Instant Insights /

What advisors want from retirement plan record-keepers

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