A new survey of 403(b) plan trends highlights opportunity for financial advisors looking to expand or break into the smaller nonprofit retirement plan market. That is one of the key findings outlined by Aaron Friedman, national nonprofit practice leader for the Principal Financial Group, which sponsored the Plan Sponsor Council of America survey.
Friedman, who spoke with AdvisorOne in a telephone interview, cited as one example the percentage of organizations with a committee that reviews fund performance. In the case of large plans (with 1,000 or more participants), 89% had investment committees compared with just 20% of organizations with 49 or fewer participants. “There’s work to be done here,” said Friedman, who added that it is in the smaller plans that have not refined their investment lineups or matched the level of participant education where advisors can add the most value.
Friedman pointed to a number of areas where the PSCA survey, released Wednesday, highlights a discrepancy between large and small plans. Nearly two-thirds of large plans changed their investment lineup in the past year. “That’s pretty close to [the level] in 401(k) plans, which makes sense because in general there is a due diligence process in place and that’s how these plans are supposed to run,” he said. But only 15% of small plans saw investment lineup changes within the last year.
More than three times as many large firms as small hired an investment consultant in the last year, and nearly twice as many increased participant education, the survey shows.
The best way to get into the market, Friedman said, is through networking. “Within one’s community, house of worship, Chamber of Commerce, that’s where [advisors] are going to find people involved in charity–by simply talking to people involved in charitable organizations.”