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

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And as next year’s compliance requirements with the full ruledraw closer, more advisors can expect to be replaced, according tothe 2017 Retirement Planscape study, issued byCogent Reports, a division of Market StrategiesInternational.

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

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

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

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

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Impacts to plan administration

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

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

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Going forward, another 26 percent of large and mega sponsorsexpect to do the same. And one in five will change the way advisorsare compensated.

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

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

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

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Record keepers under microscope too

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

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That quality, or lack of it, drove many sponsors to changerecord-keepers in the past year. Nearly 10 percent of sponsors whochanged service providers said the pursuit of higher quality menuswas the top reason; and 30 percent of sponsors said the quality ofinvestment options was a top-three reason for changingrecord-keepers.

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Investment fees were cited as the reason for dropping incumbentservice providers by 15 percent of sponsors that made a change; andplan administration fees were cited as the top reason by 13 percentof plans.

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

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One aspect of the study highlights the difficulty record-keepershave in differentiating from the competition in a crowded marketplace.

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

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

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“There’s definitely opportunity for more effective outreach inorder to communicate plan provider differentiation,” saidJohnston-Ketterer.

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Read more DOL Fiduciary Rule coverage

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.