Press Release
401k Research Project Shows Need for Unbiased Plan Investment Tools
BERKELEY, CA, -- McHenry Consulting Group, LLC, announced preliminary results of a long-term market study of the needs of retirement plan sponsors and the professionals who support them.
"The response has been overwhelmingly positive to the topic," said Rory Desmond, Research Project Manager. "There is a clear demand for tools that integrate investment policy statement production, fund selection and quarterly monitoring," he continued.
McHenry Consulting Group is engaged in market research about the issue of fiduciary responsibility and plan sponsor risk in how plan sponsors choose and monitor their retirement plans.McHenry has surveyed third party plan administrators (TPAs), advisors, brokers, insurance companies and banks. A clear consensus emerges from all participants that many plan sponsors remain unaware of their responsibilities and of their fiduciary risk exposures. For example, many small plan sponsors remain ignorant of the need to have an Investment Policy Statement (IPS), let alone how to create one.
An area of concern cited by a majority of McHenry's respondents was that plan sponsors do not have a defined system for regularly monitoring the performance of the funds in their plan. "People just want to set up a plan once and let it run" said one advisor. Plan sponsors turn to external experts to do all of this work for them: picking the funds and setting up the parameters of the plan. However this does not negate their fiduciary role. And, say the experts, more education of plan sponsors is needed.
"The results are quite favorable," said Ward Harris, Managing Director of McHenry Consulting Group, including over 150 responses from retirement specialists with a total population of 3,000 individuals.
- Over 83% of the respondents identified a need for such a product to support plan sponsors.
- 66.7% of the respondents felt strongly about this need.
- Over 70% of respondents indicated that their firm would be interested in an offering with these attributes.
"Schwab, Nationwide, TeamVest and others have brought similar products and services to market," said Harris, "but they are tied to investment and administration services from those firms. We found a strong interest in objective and independent sourcing of this support. While the study did not address pricing of such services, we have seen wholesale price points of 10 to 25 basis points on advised asset values. Of course the service is usually free if obtained from a vendor whose funds are being reported upon."
"McHenry has found the information from this study to be particularly valuable to 401k service providers and investment managers seeking deeper, richer and stronger relationships with professional intermediaries such as brokers, advisors and TPAs that support such plans," said Harris.
Comments suggest a need felt by advisors who serve or wish to serve retirement plans. Many of the concepts and services required by 401k and defined benefit plans are quite different from those offered to high net worth personal clients. A summary of the report, with staff conclusions and strategic insights is available.
McHenry Consulting Group provides strategic analysis and in-depth research on issues related to business planning, investment services, technology offerings and strategic alliances to corporate employers and financial services institutions. Based in Berkeley, CA, McHenry has additional offices in New York, Boston and London. For additional information about McHenry, visit www.mchenryconsulting.com.
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