More than 80% of retirement plan sponsors said they are currently using a consultant, thereby reflecting the need for guidance in an increasingly complex landscape, according to Morgan Stanley’s 2024 Retirement Plan Survey, released on Oct. 21.
These consultancy arrangements are also shifting towards more hands-on, personalized approaches, the survey found.
For example, consider that a 3(21) fiduciary acts as an investment adviser who makes investment recommendations regarding plan assets; while, in contrast a 3(38) investment manager reviews investment options, makes investment decisions and ultimately takes more fiduciary responsibility for the plan's day-to-day investments. At present, 3(21) relationships are nearly twice as common as 3(38) relationships, (55% vs. 27%, respectively), however this gap appears to be closing, with most 3(38) users having initiated their engagements within the past five years.
Moreover, almost one-half of plan sponsors (48%) who are currently not using a 3(38) investment manager are either highly or partly considering working with one. Among those plan sponsors who are not using nor even considering a 3(38) investment manager, their primary reason was their satisfaction with their current approach.
On the other hand, plan sponsors who are considering switching to a 3(38) investment manager cite such factors as a reduced workload for executives, maximum investment liability transfer under ERISA and the 3(38) investment manager’s ability to take immediate action for fund changes.
The survey also found that while most plan sponsors are not currently seeking to increase the number of asset managers they use, more than a one-third want to expand the number of investment options they offer.
Most retirement plan sponsors are now adding or have already added target-date funds with guaranteed payouts (71%), multiasset strategies (65%) and hybrid default investment options (56%) to their offerings.
At present, 64% offer managed accounts, with another 22% planning to do so.
The three most popular educational materials available to 401(k) participants are online retirement planning tools (cited by 85% of respondents), online account review and analysis tools (74%), and written education content (73%).
Consultants and investment advisers are now the most common source for participant educational resources, with nearly one-half of (47%) plan sponsors turning to their consultants to provide these services. This trend is expected to continue as consultants increasingly incorporate participant education into their offerings, they survey reported.
"Retirement plans are adapting to address both company and employee needs, and our survey results show that it's not just about improving financial results, but about doing what's best for the future," said Jeremy France, head of institutional consulting solutions at Morgan Stanley, in a release issued in tandem with the survey. “Plan sponsors are looking for a variety of solutions to help them maintain competitive benefits, foster employee understanding and fulfill fiduciary responsibilities, but there’s no one-size-fits-all recipe.”
France added: “Instead, we believe that it’s only through tailored guidance that organizations can find the right blend of support, investment options and education to unlock the full impact of their plans.”
The survey polled about 190 plan sponsor decision-makers with 401(k) plans with at least $50 million in assets in May 2024. Of those 190, some 56 had 401(k) plans with more than $1 billion each.
