Focus on outcomes to land business, advisors urged

Defined contribution plans have the largest slice of the retirement pie, (19.4 percent), followed by individual retirement accounts (18.4 percent), and, finally, defined benefit plans (15.5 percent). 

About $4.2 billion is invested in private-sector 401(k) plans in the U.S., the bulk of all defined contribution-type plans. 

The “evolution” in the advisory market over the past few years, according to John Guido, a principal at RRI, has seen more advisors specializing in retirement. As of last year, 24 percent of advisors identified themselves as retirement specialists compared to 18 percent who did so in 2005. Eighty percent of them viewed themselves as fiduciaries, Guido noted.

That shift has also meant more advisors working with fee-based compensation models, rather than commission-based ones, and fewer insurance or wirehouse advisors working in the retirement plan field.

Plan sponsors in search of an advisor, he said, are putting an emphasis on several key points including open architecture investment platforms (defined as those offering 1,000 or more mutual funds), and investments with zero revenue sharing by the mutual funds. 

The greatest emphasis, however, is on how well an advisor can prepare an employer’s workforce for retirement, not on any given fund’s performance.  

That, Guido and Bush said, is now a critical differentiator.