In preparation for the implementation of the fiduciary rule’s impartial conduct standards, some plan sponsors of mega defined contribution plans fired incumbent plan advisors.

And as next year’s compliance requirements with the full rule draw closer, more advisors can expect to be replaced, according to the 2017 Retirement Planscape study, issued by Cogent Reports, a division of Market Strategies International.

According to the report, the seventh in an annual series, 4 percent of sponsors across a sampling of more than 1,400 plans spanning the micro-to-mega spectrum said the impartial conduct standards requirement caused them to fire incumbent advisors.

To date, plan advisor turnover has been highest among mega-plans, with 11 percent of surveyed sponsors saying the rule’s impact led to a change in plan advisors.

But more turnover can be expected before January 1, 2018, when the rule’s full implementation is scheduled. Nearly 20 percent of large and mega-plan sponsors say they will change their plans’ advisors by then.

Some turnover is also expected downstream: 14 percent of sponsors of micro-plans expect to switch advisors; and 12 percent of small and midsized plan sponsors will fire incumbent advisors, according to the report.

Impacts to plan administration

About half of the sponsors surveyed said the fiduciary rule has impacted how they administer plans.

Across all plan sizes, the most common act for sponsors in reaction to the rule was to review fee structures: 27 percent of large and mega plans did so; nearly a quarter of small and midsized plans did so.

Going forward, another 26 percent of large and mega sponsors expect to do the same. And one in five will change the way advisors are compensated.

Also telling: one quarter of large and mega sponsors said the advice participants receive will be impacted by the rule.

This year, sponsors’ top concern is ensuring their employees are properly preparing for retirement.

For large and mega sponsors, educating participants is also a top priority. Critics of the fiduciary rule charge that in limiting the ways service providers can communicate without assuming fiduciary exposure, the rule is bound to restrict participants’ access to education.

Record keepers under microscope too

The study shows that the quality of investment offerings is also a top-of-mind concern for sponsors.

That quality, or lack of it, drove many sponsors to change record-keepers in the past year. Nearly 10 percent of sponsors who changed service providers said the pursuit of higher quality menus was the top reason; and 30 percent of sponsors said the quality of investment options was a top-three reason for changing record-keepers.

Investment fees were cited as the reason for dropping incumbent service providers by 15 percent of sponsors that made a change; and plan administration fees were cited as the top reason by 13 percent of plans.

Record-keepers would “do well to proactively initiate fee discussion to get out in front of sponsors’ fee sensitivity,” said Julia Johnston-Ketterer,senior product director at Cogent Reports, in a recent webinar discussing the Retirement Planscape findings.

One aspect of the study highlights the difficulty record-keepers have in differentiating from the competition in a crowded market place.

Beyond general advertising campaigns, the study found that plan providers have low engagement with sponsors.

The study looks at sponsors’ experiences with 36 record-keepers. Across that swath, only 12 percent of sponsors said they had had direct interaction with a representative from the provider community.

“There’s definitely opportunity for more effective outreach in order to communicate plan provider differentiation,” said Johnston-Ketterer.

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