Nearly Half of Plan Sponsors Considering Changing Advisors, Recordkeepers

(401K Specialist) - Competition amongst plan advisors and recordkeepers is reaching an all-time high, with 47% of plan sponsors considering a new advisor and 48% considering a change of recordkeepers for their 401k plans.

“Plan sponsors are continuously seeking more expertise from their plan advisors year-over-year to help them in a more diversified capacity and are not afraid to look elsewhere if a competing advisor offers a better experience”

- Fidelity Institutional’s Liz Pathe

This according to the 13th  edition of Fidelity Investments’ Plan Sponsor Attitudes Study, released today, which found that in 2022 plan sponsors are the most active in years in making big changes to their retirement plans.

Fidelity’s study, which began in 2008 and surveys employers that offer retirement plans using a wide variety of recordkeepers, found that 88% of plan sponsors responding to the survey are planning to make changes to plan design and 93% are planning to make changes to their investment menu lineup.

The percentage of sponsors planning lineup changes in 2022 increased in 14 of the 16 categories presented in the survey. The bottom line? Plan sponsors aren’t afraid to make changes right now in search of better service and a better outcome for participants.

“Plan sponsors are continuously seeking more expertise from their plan advisors year-over-year to help them in a more diversified capacity and are not afraid to look elsewhere if a competing advisor offers a better experience,” said Liz Pathe, head of Defined Contribution Investment Only (DCIO) Sales at Fidelity Institutional. “With such strong activity this year, it increases the expectations and pressures surrounding this space.”

Increasing expectations for plan advisors

Although advisor satisfaction reached its highest level in five years (76%), sponsors actively seeking a new advisor also hit record highs (47%) compared to 2021 (34%).

The top reasons include: the need for better employee communications and education; another advisor offered a superior investment lineup; and the need for an advisor who is more effective in dealing with servicing issues with the recordkeeper.

In fact, plan sponsors are seeking more advisor expertise in many areas, and when asked, proactive suggestions for improving plan performance was the most notable request (51%).

Advisor solicitations also doubled this past year, with 66% of plan sponsors reporting that prospecting advisors piqued their interest within three main categories: 1) knowledge on 401k plans, 2) lower costs, and 3) help with fiduciary responsibilities, showing that sponsors value advisors who can provide education and improve outcomes the most.

Sponsors are also recognizing that advisors play a key role in attracting and retaining talent, with 91% of sponsors reporting that advisors help promote their retirement plan to current and prospective employees.

It’s also reported that advisor guidance surrounding Heath Savings Accounts (HSAs) is important, and those advisors that had conversations regarding HSAs earned a higher satisfaction score than those who didn’t (+11 points).

Evolving investment menus

Investment menu changes continue to be on the rise, with 93% of plan sponsors planning to make changes to their investment lineups in 2022.

The top three planned changes in the next year include: expanding the number of sustainable or environmental, social, and governance (ESG) funds (27%); increasing the number of investment options (27%); and increasing the number of managed account options offered (26%).

When asked about interest in ESG, sponsor interest persisted, with 73% stating their advisor has proactively mentioned ESG investment options and 75% of sponsors wanting to know more. Interestingly, 44% of sponsors prefer ESG-focused strategies that invest only in companies that screen well based on various ESG factors, whereas 48% prefer ESG as a management focus and one of many inputs used to make investments decisions.

“Plan sponsors are taking an active role in evaluating various investment menu additions that are at the forefront of our industry,” Pathe said. “Providing education and guidance during a time where our investment landscape is constantly evolving is pivotal in helping employees strengthen their financial knowledge.”

Supporting retirement readiness through plan design changes

Sponsors are highly satisfied that plans are meeting their goals, with ratings hitting multiyear highs especially among advised plans (76% satisfaction rating vs. 65% for non-advised). Almost one-quarter (22%) of plan sponsors are measuring the success of plans based on the benchmark of industry standards for employee participation/savings rate goals, while others measure based on employee happiness (19%) and participation levels (13%).

Seventy percent of plan sponsors believe employees are saving enough for retirement, with 64% believing the auto-enrollment deferral rate/company match are a sufficient retirement savings rate (up from just 46% in 2018).

However, there are competing financial priorities that are affecting employee savings, according to plan sponsors. When asked what these were, 50% of respondents reported that current living expense are too high, 40% reported a lack of discipline in saving for future needs, and 37% reported it was due to high healthcare costs.

Sponsors reported that more than half of employees (62%) retire early, some by choice and others by necessity, with 34% due to reasons within their control, and 28% due to reasons beyond their control. To combat these competing financial priorities, 88% of sponsors expect to make plan design changes in 2022. When asked what changes are expected, 27% said they plan to increase their matching contribution, with 34% reporting that change was made in the past two years.

The 2022 Plan Sponsor Attitudes Study was an online survey of 1,285 plan sponsors conducted in March 2022 on behalf of Boston-based Fidelity, which was not identified as the survey sponsor. Respondents were identified as the primary person responsible for managing their organization’s 401k plan. All plan sponsors confirmed their plans had at least 25 participants and at least $3 million in plan assets.

Additional information on the survey, as well as resources and tools—including fund analytics and details on investment options—can be found at

By Brian Anderson
August 23, 2022


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