Nearly Half of Plan Sponsors Seeking New Advisors in 2022: Fidelity

What You Need to Know

Although 76% of plan sponsors expressed satisfaction with their advisor, 47% are looking for a new one.
Sponsors want better communication and education, superior investment options and advisors who can deal with servicing issues more effectively.
Prospecting advisors impressed sponsors by demonstrating their knowledge of 401(k) plans, offering lower costs and indicating willingness to help with fiduciary responsibilities.

Change is afoot in the retirement plan industry this year, with plan activity and competition among plan advisors reaching multiyear highs, according to Fidelity Investments’ annual plan sponsor attitudes study released Tuesday.

The study found that although 76% of sponsors expressed satisfaction with their advisor, 47% are looking for a new one, up from 34% in the 2021 survey. Forty-eight percent are considering a change of record-keepers.

This search for a new advisor is driven by several factors, including:

Better employee communication and education is needed. 
Another advisor offered a superior investment lineup.
An advisor who can deal more effectively with servicing issues with the record-keeper is needed.

Fidelity noted that plan sponsors are seeking more advisor expertise in many areas, notably proactive suggestions for improving plan performance, cited by 51% of sponsors.

“Plan sponsors are continuously seeking more expertise from their plan advisors year-over-year to help them in a more diversified capacity and are not afraid to look elsewhere if a competing advisor offers a better experience,” Liz Pathe, head of defined contribution investment only sales at Fidelity Institutional, said in a statement. 

“With such strong activity this year, it increases the expectations and pressures surrounding this space.” 

The online survey was conducted in March among 1,285 plan sponsors on behalf of Fidelity, which was not identified as the survey sponsor. Respondents were the primary person responsible for managing their organization’s 401(k) plan, and confirmed that their plans had at least 25 participants and at least $3 million in plan assets.

Advisors’ Value

According to the survey, advisor solicitations doubled over the past year. Two-thirds of plan sponsors said prospecting advisors piqued their interest by demonstrating their knowledge of 401(k) plans, offering lower costs and indicating willingness to help with fiduciary responsibilities.

Fidelity said this shows that sponsors value advisors who can provide education and improve outcomes the most. 

Ninety-one percent of sponsors reported that advisors help promote their retirement plan to current and prospective employees, a key factor in attracting and retaining talent. 

Advisor guidance regarding health savings accounts is also important. The survey found that advisors who had conversations regarding HSAs earned an 11-point higher satisfaction score than those who did not. 

Evolving Investment Menus

This year, 93% of sponsors in the survey said they plan to make changes in their investment lineups. Twenty-seven percent said they will expand the number of sustainable or environmental, social and governance funds; 27% will increase the number of investment options; and 26% will increase the number of managed account options they offer.