For DC Plans, Pandemic Reinforces Value of Consultants and Advisors
Guiding Defined Contribution (DC) plans through economic cycles is challenging enough without harsh headwinds from a global health crisis. But more plan sponsors are getting invaluable expert help to navigate through current challenges while keeping a long-term perspective.
Support for third-party expertise was rising well before the outbreak. About 58% of plan sponsors rely on some level of consultant or financial advisor expertise, according to our latest Inside the Minds of Plan Sponsors survey—up 16% from our prior survey. We define both the consultant and advisor roles as offering a distinct skill set in the areas of plan design, help with choosing service providers, and selecting and monitoring investments. Each role provides unique value to sponsors, but for simplicity’s sake, we’ll refer to both as consultants.
From Investments to Education—What Consultants Deliver
We think the growth in sponsor-consultant partnerships stems from a growing sense of purpose. Seven of 10 plan sponsors identified themselves as fiduciaries (previously 58%), and securing consultants’ expertise can help them fulfill their responsibilities. Further, more than half (54%) of sponsors said it’s “very important” to have a consultant act as a fiduciary, up from 37% in our last survey.
Consultants help in diverse ways—from investment review to education—and sponsors value just about all of it, especially if it provides actionable intel. Plan financial integrity is another growing priority, which explains why 61% of respondents who use a consultant now rely on them for investment advice as fiduciaries. About half said their consultant provides discretionary investment management services, versus 35% in our prior survey.
Sponsors highly value second opinions, too, with six in 10 saying they want them for an objective check on the handiwork of their plan’s other service providers (Display). And 42% of plan sponsors (up from 27% previously) said consultants are their fallback if something goes wrong; while sponsors are fully responsible, leveraging third-party input goes a long way to show best intentions.