Pulse Logic 2011 Syndicated Registered Investment Advisor Qualified Plan Study.

Transcription

1 Pulse Logic 2011 Syndicated Registered Investment Advisor Qualified Plan Study

2 2 Study Content: I. Demographics II. Production III. Approach IV. Attitudes and behaviors V. Preferences VI. Services

3 3 Background: In the continuing evolution of the retirement plan advisor, the registered investment advisor approach is proving an increasingly appealing model to the advisor. The catalysts forcing advisors to redefine themselves are multifold. Increased expectations and accountability from their plan sponsor clients, the advisorʼs continued efforts to gain competitive advantages within the advisor served marketplace, and pending implementation of new fee-disclosure regulations continue to force plan advisors to assess their practices. Pulse Logic, using its proprietary advisor data base, identified 12,996 potential RIAs to survey. We then eliminated asset managers, RIAs with affiliations to service provider broker dealers, RIAs without qualified plan clients, and those who focus on institutional type clients and others not positioned for the advisor served qualified plan marketplace. This process identified 6100 RIAs. The survey instrument was developed jointly with syndicate members and launched on April 11th and closed on May 5th. Three requests were sent to all identified advisors. As an incentive for advisors to complete the study, they were promised high level results of the questionnaire following its completion. Among the respondents, 317 qualified as completely independent RIAs or RIAS with a broker/ dealer affiliation. In its simplest form, the RIA model is defined under the Investment Advisers Act of 1940 and is associated with the term Investment Adviser(IA). An IA is defined by the Securities and Exchange Commission as an individual or a firm that is in the business of giving advice about securities. Individuals or firms that receive compensation for giving advice on investing in securities are deemed to be IAs. It is common for investment advisers to manage portfolios of securities. RIAs are generally paid as a percentage of the value of the assets they manage, an hourly fee, a fixed fee, or commission (if the adviser is also a broker/dealer). Based on the Investment Adviser Act of 1940, the advisor must act in the best interest of their client and eliminate consciously or unconsciously, any advice not in the best interest of their client.* The RIA landscape of potential qualified plan advisers is estimated to be roughly 13,000 firms. Over 8000 of these firms manage less than $25M, 1200 manage $25M to $50M, 1150 manage $50M - $100M, 1900 manage $100M - $1B, and 300 manage in excess of $1B of assets.***

4 4 Background (cont.) While RIAs have been active in the qualified plan marketplace, their growing ranks and influence within the marketplace make it increasingly important for retirement plan service providers to understand their demographics, behaviors, attitudes, preferences, production, and value proposition. In 2010, RIA firms with less than $25M of assets under management grew 101%, firms with $25M to $100M grew 24% and firms exceeding $100M grew 15%.** Scotttrade Advisor Services, Trade PMR, and Shareholder Services Group report setting up one new RIA on average each day.*** Over the last five years, estimates of RIA managed assets growth range from 200% to 300%.**** This study indicates marked differences exist between financial advisors and RIAs. The data and analysis also demonstrate: - significant differences exist between Independent Registered Investment Advisors and Broker Dealer Affiliated RIAs - RIAs act more like consultants than financial advisors - RIAs tend to have an investment bias in their approach to the qualified plan market - RIAs strongly protect their unbiased approach to the business - RIAs demonstrate little tolerance for proprietary fund or other investment platform restrictions - RIAs prefer to utilize an unbundled approach - RIAs pursue larger than plans than financial advisors - RIAs are significantly more participant centric - the RIAs who approach their qualified plans prospects as a specialist have more plans and qualified plan assets under management *U.S. Securities and Exchange Commission: Investment Advisers: What You Need to Know Before Choosing One, 8/20/2010 ** RIA Database ***RIA Today ****Investment News

5 I. Demographics 5 Survey Statistics Summary: Completed 317 Started 342 Viewed 361 Completed/Started 93% Completed/Viewed 88% Started/Viewed 95%

6 I. Demographics 6 In what type of firm is your primary affiliation (select one)? Independent retail Registered Investment Advisory (RIA) firm Independent broker/dealer (LPL Financial, Raymond James, etc.) Retirement plan administrator or plan administrator s broker/dealer Regional broker/dealer (Janney Montgomery Scott, Stifel Nicholas, RBC Capital, RW Baird etc.) Financial institution (bank, credit union, etc.) Wirehouse (Morgan Stanley Smith Barney, Merrill Lynch/Bank of America, UBS, or Wells Fargo) Insurance broker/dealer (career/captive agents) that can sell almost any provider s products Other Not Sure Insurance broker/dealer (career/captive agents) that can only/mostly sell firm s own products 0% 20.0% 40.0% 60.0% 80.0% Over 72% of respondent are true independent RIAs

7 I. Demographics Besides the company are you currently working for or the company that is your primary broker/dealer, what other firms from the following alphabetical list below do you use to clear your retirement plan product trades (select all that apply)? 7 TD Ameritrade Charles Schwab Fidelity Brokerage Services Not applicable Other Vanguard Wells Fargo Pershing National Financial Services State Street Trust Company of America LPL Financial Bank of New York Mellon Commonwealth Financial Network First Clearing Prudential Raymond James SEI Wilmington Trust Bank America Merrill Lynch Morgan Stanley Smith Barney Chase Investment Services Edward D. Jones and Co. Ameriprise Financial FSC Securities RBC Dain Rauscher Royal Alliance Securities America Southwest Securities US Bank UBS 0% 5.00% 10.00% 15.00% 20.00% The respondents are using independent platforms

8 8 Besides the company are you currently working for or the company that is your primary broker/dealer, what other firms from the following alphabetical list below do you use to clear your retirement plan product trades (select all that apply)? segmented by advisor value proposition % 80.00% 60.00% 40.00% Overall Better fiduciary oversight Better overall qualified plan results Lower investment fees Better plan specific investment strategy 20.00% 0.00% Ameriprise Financial Bank of New York Mellon Charles Schwab Commonwealth Financial Network Fidelity Brokerage Services First Clearing FSC Securities National Financial Services Pershing Prudential Raymond James RBC Dain Rauscher Royal Alliance Securities America SEI Southwest Securities State Street TD Ameritrade Trust Company of America US Bank UBS Vanguard Wells Fargo Wilmington Trust Bank America Merrill Lynch Morgan Stanley Smith Barney Chase Investment Services Edward D. Jones and Co. LPL Financial Not applicable Other Clearly, TD Ameritrade is preferred among those claiming lower investment fees as their value proposition.

9 I. Demographics 9 What percentage of your total annual revenue is attributable to qualified plans? 30% 23% 15% 8% 0% < 10% 10% - 25% 26% - 50% 51% - 99% 100% Average: 37% Median: 25% RIAs have higher percentage of revenue attributable to qualified plan sales than registered advisors

10 10 What percentage of your total annual revenue is attributable to qualified plans? - segmented by advisor value proposition 100% 75% 50% 25% 0% Better fiduciary oversight Better overall qualified plan results Lower investment fees Better plan specific investment strategy Overall < 10% 10% - 25% 26% - 50% 51% - 99% 100% The lower investment fee strategy RIAs limit themselves within this market, while the specialists do not.

11 I. Demographics 11 My total assets under management are (please indicate to the closest million): < $10M $10M - $20M $20M - $50M $50M - $100M $100M - $250M $250M - $500M $500M - $1B > $1B 0% 6% 13% 19% 25% RIAs assets under management are larger than financial advisors

12 I. Demographics 12 Among my total assets under management, what percentage is attributable to qualified plans? 100% 80% 60% 40% 20% 0% <20% 20% - 39% 40% - 59% 60% - 79% 80% - 100% Average 43%, Median 40% While this graph demonstrates a fairly even distribution of QP assets among total AUM, overall RIAs have greater percentage of assets from QPs.

13 I. Demographics 13 Total qualified plans under management (not including IRAs): 50% 38% 25% 13% 0% < >100 Average: 49 Median: 16 This graph demonstrates that RIAs have much greater upside potential in plan count

14 I. Demographics 14 In your business, what percentage of your qualified plan revenue is attributable to the following plan types? 401k DB Cash Balance 403b a 0% 20.0% 40.0% 60.0% 80.0% While the clear majority of work is 401k plans, the RIAs high net worth clients present opportunities with DB and Cash Balance plans

15 I. Demographics 15 Please indicate the percentage of each of the following that make up your qualified plans under management. 70% % % % 0.2 0% Bundled Unbundled 0 Bundled Unbundled BD affiliated RIAs Independent retail Registered Investment Advisory (RIA) firm Unlike broker dealer affiliated RIAs, Independent RIAs prefer the unbundled approach. It compliments and reflects their approach and presents opportunities for TPAs and DCIO firms.

16 II. Production 16 Which one of the following best defines the assets of your typical target qualified plan: 40.0% 30.0% 20.0% 10.0% 0% < $1M $1M $3M $3M $10M $10M - $50M $50M - $100M > $100M 30% Segmented by bundled versus unbundled 23% 15% 8% 0% < $1M $1M $3M $3M $10M $10M - $50M $50M - $100M > $100M Bundled Unbundled Compared with broker dealer reps, RIAs target larger plans.

17 17 Which one of the following best defines the assets of your typical target qualified plan - segmented by type of RIA % % % % 0% < $1M $1M $3M $3M $10M $10M - $50M $50M - $100M > $100M Regional broker/dealer (Janney Montgomery Scott, Stifel Nicholas, RBC Capital, RW Baird etc.) Independent broker/dealer (LPL Financial, Raymond James, etc.) Independent retail Registered Investment Advisory (RIA) firm Clearly, independent RIAs pursue larger plans

18 II. Production 18 Please indicate how many qualified plans became new clients in 2010? 50% 38% 25% 13% 0% 0 1 to 3 4 to 6 7 to to to 100 > 100 Average: 9.2 Median: 2 Compared to financial advisors, new plan sales are similar, but a small group of RIAs demonstrate the ability to grow significantly.

19 II. Production 19 My new qualified plan assets from 2010 sales: 30% 23% 15% 8% 0% $0 $1 - $1M $1M - $3M $3M - $5M $5M - $10M $10M - $20M > $20M RIAs tend to focus on larger plans.

20 20 My new qualified plan assets from 2010 sales - segmented by independent RIAs and broker dealer affiliated RIAs 40% 30% 20% 10% 0% $0 $1 - $1M $1M - $3M $3M - $5M $5M - $10M $10M - $20M > $20M Overall Independent RIA BD affiliated RIA Independent RIAs pursue larger plans than broker dealer affiliated RIAs

21 II. Production 21 Among your new sales during the last 12 months, what percentage of your plans did you sell as an: 90% 68% 45% 23% 0% RIA (fee based) Financial advisor (commission) Overall Independent RIA Broker Dealer Affiliated RIA

22 III. Approach 22 For the three approaches to compensation below, indicate the percentage of your qualified plan work attributable to each. Segmented by independent RIAs and BD affiliated RIAs 20% Independent RIA 64% 16% BD affiliated RIA 0% 20% 40% 60% 80% Hard dollar/ institutional Commissioned ERISA Bucket Commission based Revenues are put into an ERISA bucket, everyone is paid from it using 12(b)-1 and other fees All hard dollar charges; institutional funds are utilized with no cross-subsidization between funds Independent RIAs in practice prefer the hard dollar RIA model

23 III. Approach 23 For my plans, what percentage am I a named fiduciary in the following capacities? Plan only 42% Plan and participants 31% Participants only 4% Not a named fiduciary 23% While 35% are named participant fiduciaries, a much greater percentage provide participant advice

24 III. Approach 24 If you are a plan level fiduciary, in which of the following capacities do you provide services (indicate if always, usually, infrequently, or never)? a. ERISA Section 3(21)(a) where both the adviser and the plan sponsor have co-fiduciary responsibilities for the plan investments b. ERISA Section 3(38) where the adviser selects and adjusts investment options without explicit direction from the plan sponsor Usually 36% Infrequently 8% Never 11% Infrequently 27% Usually 16% Never 37% Always 45% Always 20%

25 III. Approach 25 In the future... I plan to practice as a 3(21)(a) fiduciary: I plan to practice as a 3(38) fiduciary: Usually 30% Infrequently 11% Never 13% Usually 22% Infrequently 19% Never 41% Always 46% Always 19% RIAs indicate anticipate little change from their current fiduciary status

26 III. Approach 26 Which of the following best describes your most frequently used approach to qualified plans? Employee communications specialist 15% Consultant to solve tax and retirement funding issues 14% Investment expert 38% Plan design/erisa expert 15% Sales/relationship builder 17% RIAs tend to take a specialist approach, where as a greater percentage of financial advisors take a sales/relationship builder approach.

27 III. Approach 27 Which of the following best describes your value-proposition to your qualified plans? Lower investment fees 8% Better plan specific investment strategy 21% Better overall qualified plan results 42% Better fiduciary oversight 29%

28 28 RIA approach segmented against value proposition Plan design/erisa expert Sales/relationship builder Investment expert Employee communications specialist Consultant to solve tax and retirement funding issues 0% 15.00% 30.00% 45.00% 60.00% Overall Better fiduciary oversight Better overall qualified plan results Lower investment fees Better plan specific investment strategy

29 29 RIA value proposition segmented against approach Overall Better fiduciary oversight Better overall qualified plan results Lower investment fees Better plan specific investment strategy 0% 15% 30% 45% 60% Plan design/erisa expert Sales/relationship builder Investment expert Employee communications specialist Consultant to solve tax and retirement funding issues

30 IV. Attitudes and behaviors Which of the following statements best describes qualified plans as a business line? 30 Qualified plans are a great business, and I see them becoming or continuing to be my major source of revenue Qualified plans are a good business, and I see my book continuing to grow Qualified plans are as good as any other business line, and the portion of my revenue attributable will remain the same I m not that optimistic about qualified plans; my revenue from plans will diminish I plan to eliminate qualified plans from my business 0% 13% 25% 38% 50% Like broker dealer reps, RIAs are optimistic toward this business

31 IV. Attitudes and behaviors 31 In 2011 and 2012, what poses a significant, possible, or no threat to your business? New regulations Sales and marketing Compliance Uncertain economic environment Fee erosion Practice management Operations/systems Business risks 0% 20% 40% 60% 80% 100% Significant threat Possible threat No threat RIAs remain optimistic and see little threats to their business

32 IV. Attitudes and behaviors 32 How much of your practice focuses on the retirement distribution phases? None Very little Some A significant amount 0% 10.0% 20.0% 30.0% 40.0%

33 IV. Attitudes and behaviors 33 What systems do you use for tracking transactions, financial planning, and portfolio management? Tracking Transactions Proprietary 10% Morningstar 8% Portfolio Center 7% Advent 7% Wealth Central 2% Gainskeeper 2% Portfolio Management: Proprietary 15% Morningstar 11% Advent 5% Portfolio Center 5% Others: Fiduciary Investment Reporting Manager, RPAG, Assetbook, Investworks, Principia, Asset Max, and Power Advisor Financial Planning Proprietary 14% Money Guide Pro 8% Morningstar 6% Moneytree 6% Naviplan 4% Others: Financeware, Betavest, Emoney, Wealthvision, and Fidelity Income Evaluator No clear preferred provider of choice emerges for these functions. Clearly the market for these systems appears to be very fragmented

34 IV. Attitudes and behaviors 34 Which of the following designations, licenses, or degrees do you currently have now? Please select all that apply. FINRA Series 6 FINRA Series 7 FINRA Series 26 FINRA Series 55 FINRA Series 63 FINRA Series 65 FINRA Series 66 Life insurance Health insurance Certified Public Accountant (CPA) Certified Financial Planner (CFP) Chartered Financial Analyst (CFA) Personal Financial Specialist (PFS) Charter Financial Consultant (ChFC) Registered Investment Advisory Representative (RIA) Certified Investment Management Analyst (CIMA) Chartered Advisor for Senior Living (CASL) Certified Retirement Counselor (CRC) Other (Please specify) Accredited Investment Fiduciary (AIF) 0% 13% 25% 38% 50%

35 IV. Attitudes and behaviors 35 My first priority when ranking qualified plan client servicing is based on which of the following (select one): Assets 27% Number of participants 2% Profitability 20% Future opportunities 8% Revenue 7% Relationship 36% Relationship and assets are also the most popular method of prioritizing clients for financial advisors

36 IV. Attitudes and behaviors 36 My second priority when ranking qualified plan client servicing is based on which of the following (select one): Assets 26% Number of participants 16% Profitability 7% Future opportunities 12% Revenue 16% Relationship 24%

37 IV. Attitudes and behaviors 37 How frequently do you meet with your high priority clients? Quarterly 59% More frequently than quarterly 10% Never 2% Semi annually 18% Annually 11%

38 IV. Attitudes and behaviors 38 How frequently do you meet with your low priority clients? Semi annually 26% Quarterly 17% More frequently than quarterly 2% Annually 47% Never 2% Less than annually 7%

39 IV. Attitudes and behaviors 39 With what percentage of your qualified plan clients do you provide participant education? 60% 45% 30% 15% 0% 0% 1-25% 26-50% 51-75% 76-99% 100% RIAs have a greater focus on the participant

40 IV. Attitudes and behaviors 40 If you do provide participant education, have you developed your own participant education program(s)? Yes No, I rely on a provider s material No, I rely on third party vendor material 0% 20% 40% 60% 80%

41 IV. Attitudes and behaviors 41 If you do provide participant education, do you create your own participant materials? Yes 76% No, I rely on the provider s material 9% No, I rely on a third party 15%

42 IV. Attitudes and behaviors 42 My participant education services include the following (indicate if always, usually, infrequently, or never): Enrollment meetings Individual enrollments 60.00% 60.00% 45.00% 45.00% 30.00% 30.00% 15.00% 15.00% 0% Always Usually Infrequently Never 0% Always Usually Infrequently Never Provide deferral rate advice Provide investment advice for key employees Provide investment advice for all employees 60.00% 60.00% 60.00% 45.00% 45.00% 45.00% 30.00% 30.00% 30.00% 15.00% 15.00% 15.00% 0% Always Usually Infrequently Never 0% Always Usually Infrequently Never 0% Always Usually Infrequently Never RIAs tend to be more participant centric than BD reps.

43 43 My participant education services include the following (indicate if always, usually, infrequently, or never) - segmented by approach Enrollment Meetings Overall Plan design/erisa expert Sales/relationship builder Investment expert Employee communications specialist Consultant to solve tax and retirement funding issues 0% 18% 35% 53% 70% Always Usually Infrequently Never

44 44 My participant education services include the following (indicate if always, usually, infrequently, or never) - segmented by approach Individual enrollments Overall Plan design/erisa expert Sales/relationship builder Investment expert Employee communications specialist Consultant to solve tax and retirement funding issues 0% 18% 35% 53% 70% Always Usually Infrequently Never

45 45 My participant education services include the following (indicate if always, usually, infrequently, or never) - segmented by approach Provide deferral rate advice Overall Plan design/erisa expert Sales/relationship builder Investment expert Employee communications specialist Consultant to solve tax and retirement funding issues 0% 20.0% 40.0% 60.0% 80.0% Always Usually Infrequently Never

46 46 My participant education services include the following (indicate if always, usually, infrequently, or never) - segment by approach Provide investment advice for key employees Provide investment advice for key employees Overall Plan design/erisa expert Sales/relationship builder Investment expert Employee communications specialist Consultant to solve tax and retirement funding issues 0% % % % % Always Usually Infrequently Never

47 47 My participant education services include the following (indicate if always, usually, infrequently, or never) - segmented by approach Provide investment advice for all employees Overall Plan design/erisa expert Sales/relationship builder Investment expert Employee communications specialist Consultant to solve tax and retirement funding issues 0% 15.00% 30.00% 45.00% 60.00% Always Usually Infrequently Never

48 IV. Attitudes and behaviors 48 Based on the following plan sizes, do you utilize QDIAs? < $1M $1M - $3M $3M - $10M Yes 67% No 33% Yes 66% No 34% Yes 76% No 24% $10M - $20M $20M - $50M > $50M Yes 77% No 23% Yes 74% No 26% Yes 73% No 27% Plan size appears to have little bearing on QDIA utilization

49 V. Preferences What type of wholesalers do you find provide the greatest value? 49 Retail mutual fund wholesaler DCIO retail funds wholesaler DCIO institutional funds wholesaler Bundled product provider wholesaler 0% 13% 25% 38% 50% This graph reflects the RIA preference for unbundled products and the traditional RIA approach

50 V. Preferences 50 I am interested in information or tools based on the following topics (select all that apply): Retirement industry trends Fiduciary liability Fees and services Plan level due diligence Plan design workshop RIA practice management Due diligence meeting Investment trends Tactical asset allocation for participants Mutual fund investment manager presentation Industry spokesman 0% 15% 30% 45% 60%

51 al 2 3. Helpful 4 portant V. Preferences 51 Which of the following attributes are important when choosing recordkeepers? Indicate for each using a 1 to 5 scale where 1 is essential and 5 is not important. The ability to swap out funds The ability for me to build asset allocation models* No proprietary fund requirements Ability to map funds in a conversion Ability to default assets to the QDIA*** The ability to administer a managed account Ability to include exchange traded funds An investment platform that also includes a subset of select funds** Ability to offer DB, DC, and NQDC in the same service package Ability to include collective investment trusts Ability to recordkeep company stock Offers an option for guaranteed income after retirement Including proprietary funds to reduce plan expenses 0% 25% 50% 75% 100% 1. Essential 2 3. Helpful 4 5. Not important *The ability for me to build asset allocation models for the plan participants **An investment platform that also includes a subset of select funds where the provider performs due-diligence ***Ability to default assets to the QDIA in a conversion, changes in the investment line up, or an effort to improve the diversification of plan assets

52 V. Preferences 52 At what plan size would you consider using a provider's proprietary funds if it lowered the cost of the plan? 50% 38% 25% 13% 0% < $1M $1M - $3M $3M - $5M $5M - $10M > $10M RIAs openness to proprietary funds that reduce cost is related to plan size, but at least half are not open to proprietary funds.

53 V. Preferences 53 Recognizing a provider may require proprietary funds, at what plan size are proprietary fund requirements appropriate for the following: 60.00% Asset class funds 45.00% 30.00% 15.00% 0% <$1M $1M - $3M $3M - $5M <$10M Never 60.00% 45.00% Target date funds 30.00% 60.00% 45.00% Fixed account 15.00% 0% <$1M $1M - $3M $3M - $5M <$10M Never 30.00% 15.00% 0% <$1M $1M - $3M $3M - $5M <$10M Never RIAs have a strong bias against proprietary funds

54 V. Preferences 54 What kind of benchmarking support do you expect from your recordkeeper (indicate if essential, helpful, or not important)? Participant health (utilization, progress, retirement tracking) Plan health (compliance) Helpful 54% Not important 14% Helpful 35% Not important 12% Essential 32% Essential 53% Investments Not important 31% Helpful 29% Essential 39%

55 55 What kind of benchmarking support do you expect from your recordkeeper (indicate if essential, helpful, or not important)? 70% Participant Health (utilization, progress, tracking) segmented by target plan size 53% 35% 18% 0% Overall < $1M $1M $3M $3M $10M $10M - $50M $50M - $100M Essential Helpful Not important The importance of providing participant benchmarking support grows with plan size

56 56 What kind of benchmarking support do you expect from your recordkeeper (indicate if essential, helpful, or not important)? 80.0% Plan Health (compliance) segmented by target plan size 60.0% 40.0% 20.0% 0% Overall < $1M $1M $3M $3M $10M $10M - $50M $50M - $100M Essential Helpful Not important Assistance assessing plan health is important to RIAs across almost all plan sizes

57 57 What kind of benchmarking support do you expect from your recordkeeper (indicate if essential, helpful, or not important)? % Investments segmented by target plan size 75.00% 50.00% 25.00% 0% Overall < $1M $1M $3M $3M $10M $10M - $50M $50M - $100M Essential Helpful Not important While RIAs tend not to value assistance benchmarking investments, there is some value offering this support in the smaller plan sizes

58 V. Preferences 58 Choose the statement below that best reflects your view of investment products that build guaranteed participant income during the accumulation phase: They are very valuable to my plans If appropriate for the plan, they can be very valuable They may add some value, but I don t consider them crucial to a plan They are not appropriate in a retirement plan 0% 15% 30% 45% 60% RIAs appear agnostic towards guaranteed participant income products

59 V. Preferences 59 What is the maximum number of funds, excluding brokerage accounts, that you ever expect to use in one of your participant directed plans? 40.0% 30.0% 20.0% 10.0% 0% < >70

60 V. Preferences 60 What is the minimum number of funds a provider should make available to you for selection for a qualified plan? 50% 38% 25% 13% 0%

61 V. Preferences 61 When a plan changes its service provider and/ or makes substantial changes to its investment model is your preference to (indicate if always, sometimes, or never): Create a mapping strategy of like funds Reenroll the participants into the QDIA Sometimes 45% Never 35% Always 47% Never 8% Reenroll the participants into the new investment selections Sometimes 55% Always 10% Never 10% Sometimes 51% Always 39% RIAs preferences can best be read by the percentage indicating they would never elect the re-enrollment strategy. Clearly their preference is to create a mapping strategy or reenroll the the participants into the new investment selections.

62 VI. Services 62 Indicate if you offer the following plan services as standard, optional, one-off or never. Investment policy development and documentation Act as a fiduciary to the plan Fund menu development Annual investment performance and fee benchmarking Fund replacements/manager search Investment reviews - annual, semi-anual, quarterly Plan level due diligence and benchmarking Asset allocation modeling Participant education strategy Employee meetings QDIA selection Plan compliance review Plan committee education Vendor fee and service reviews Act as a fiduciary to the participants Plan design consulting Plan transition, merger, integration, and termination Provider management QP vendor search Recordkeeping transition services 0% 20% 40% 60% 80% 100% Standard Optional One off Never

63 63 Gap analysis of advisor provided standard services segmented by advisor approach graph 1 An Plan level due diligence and benchmarking Plan committee education Investment policy development and documentation Annual Investment Performance and fee benchmarking Fund menu development QDIA selection Act as a fiduciary to the plan Act as a fiduciary to the participants Fund replacements/ manager search Plan design consulting -20.0% -10.0% 0% 10.0% 20.0% 30.0% 40.0% Plan design/erisa expert Sales/relationship builder Investment Expert Employee communications specialist Consultant to solve tax and retirement funding issues

64 64 Gap analysis of advisor provided standard services segmented by advisor approach graph 2 QP Vendor search Recordkeeping transition services Vendor fee and service reviews Provider management Participant education strategy Employee meetings Investment reviews - annual, semi-annual, quarterly Plan transition, merger, integration, and termination Asset allocation modeling Plan compliance review -40% -30% -20% -10% 0% 10% 20% 30% 40% Plan design/erisa expert Sales/relationship builder Investment Expert Employee communications specialist Consultant to solve tax and retirement funding issues

65 VI. Services Please indicate the perceived client importance on a scale of 0 to 3 each of these plan services (3 equals very important and 0 equals not important) 65 Annual investment performance and fee benchmarking Fund menu development Fund replacements/manager search Investment reviews - annual, semi-anual, quarterly Act as a fiduciary to the plan Participant education strategy Employee meetings Plan compliance review Investment policy development and documentation Asset allocation modeling Plan level due diligence and benchmarking Plan design consulting Vendor fee and service reviews Plan transition, merger, integration, and termination Recordkeeping transition services QP vendor search Act as a fiduciary to the participants Plan committee education Provider management QDIA selection

66 66 Please indicate the perceived client importance on a scale of 0 to 3 each of these plan services (3 equals very important and 0 equals not important), chart indicates percentage choosing 3. Annual investment performance and fee benchmarking Act as a fiduciary to the plan Fund menu development Fund replacements/manager search Investment reviews - annual, semi-anual, quarterly Participant education strategy Investment policy development and documentation Employee meetings Plan level due diligence and benchmarking Asset allocation modeling Vendor fee and service reviews Plan compliance review Act as a fiduciary to the participants Plan transition, merger, integration, and termination Plan design consulting QP vendor search Recordkeeping transition services Provider management QDIA selection Plan committee education 0% 18% 35% 53% 70%

67 VI. Services 67 Perceived client importance of advisor services versus frequency as an advisorʼs standard service Plan level due diligence and benchmarking Plan committee education Investment policy development and documentation Annual investment performance and fee benchmarking Fund menu development QDIA selection Act as a fiduciary to the plan Act as a fiduciary to the participants Fund replacements/manager search Plan design consulting QP vendor search Recordkeeping transition services Vendor fee and service reviews Provider management Participant education strategy Employee meetings Investment reviews - annual, semi-anual, quarterly Plan transition, merger, integration, and termination Asset allocation modeling Plan compliance review Perceived client importance Advisor standard service

68 VI. Services 68 Perceived client importance minus frequency as an advisorʼs standard service Plan level due diligence and benchmarking Plan committee education Investment policy development and documentation Annual investment performance and fee benchmarking Fund menu development QDIA selection Act as a fiduciary to the plan Act as a fiduciary to the participants Fund replacements/manager search Plan design consulting QP vendor search Recordkeeping transition services Vendor fee and service reviews Provider management Participant education strategy Employee meetings Investment reviews - annual, semi-anual, quarterly Plan transition, merger, integration, and termination Asset allocation modeling Plan compliance review Bars to the left of zero indicate RIAs feel the are meeting or exceeding the needs of their client. Bars to the right indicate, RIAs feel they may not be meeting the expectations of their client.

69 VI. Services 69 Please indicate how you charge for the following plan sizes (fee based, asset based, or combination of the two): 100% 80% 60% 40% 20% 0% <$1M $1M - $3M $3M - $10M $11M - $20M $21M - $50M >$51M Fee based Asset based Combination of the two

70 70 Please indicate how you charge for the following plan sizes (fee based, asset based, or combination of the two) - segmented by fee source 100% 75% 50% 25% Fees segmented by payment source: ERISA bucket and plan size (no meaningful data was provided for plans sizes >$51M) 0% <$1M $1M - $3M $3M - $10M $11M - $20M $21M - $50M Fees segmented by payment source: Hard dollar fees and plan size 90% Flat fee Asset based Combination of the two 68% 45% 23% 0% <$1M $1M - $3M $3M - $10M $11M - $20M $21M - $50M >$51M RIAs utilizing the ERISA bucket approach tend to be more asset based while those using the hard dollar fee approach still use asset based pricing, but utilize flat fee and the combination of the two more frequently.