How Do Small Businesses Shop for a New 401(k)?

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1 How Do Small Businesses Shop for a New 401(k)? 2017 Fisher Investments. Intended for use by employers considering or sponsoring retirement plans; not for personal use by plan participants. Investing in securities involves the risk of loss

2 Table of Contents 3 Introduction 4 Better Plans 6 Shopping Motivators 8 Provider Qualities 10 Shopping Methods 12 Common Practices

3 We set out to learn how small businesses choose their 401(k) providers. This report was designed to help small businesses understand the 401(k) shopping process. If you re in the market for a new 401(k) service provider (or think you might be someday), think of this report as a starting point as you search for the right solution for you and your business. Read on to see how others shop, and enter the marketplace prepared to find what you need. Find answers to questions such as: What are small business owners looking for? How many service providers are they talking to? What aspects of service do business owners value most? Research methodology: Fisher investments 401(k) Solutions surveyed 5000 small business with 10 to 300 employees. A minimum of 250 respondents were business owners. The research was collected via an online survey in December 2016.

4 Employers believe there are better plans out there. Only a small percentage of employers believe that they have the most effective retirement plan for their business

5 What do small businesses believe about retirement? 87% 78% of employers believe that saving for retirement is important. of employers believe there is a better 401(k) plan provider than their current provider. All 401(k) plans and providers are not created equal. Some providers offer self-service with low fees and no frills, while others offer more customized services with expansive choices. It s all about balancing service, fees, and employee support to find the perfect fit the right plan and provider will vary from employer to employer. Most employers who believe there is a better provider out there want to find it if they can make the time for the search.

6 Cost alone doesn t motivate small businesses. It s no surprise that cost is a main factor when it comes to deciding to shop for a new 401(k) provider. But, even more widespread in jump-starting a new provider search is a lack of personalized service.

7 What motivates small businesses to look for a new provider? Just about half of employers cite high fees as a motivating factor for beginning a provider search, but the other shopping triggers directly relate to the relationship management and the quality of service, both for employers managing the plan and employees using it. More specifically, these are the top reasons small businesses look for a new provider: The fees they pay are too high 54% Their provider representative is not responsive 51% They failed compliance testing 49% They want better investment guidance 47% Their current provider communicates poorly 45% Their investments aren t performing enough 42% They don t have enough flexible investing options for their employees 42% Their provider representative does not provide education 40% Small businesses prefer to work with 401(k) service providers who are responsive, who provide sound investment guidance, and who provide ongoing education to the plan participants.

8 Small businesses are serious about finding the right provider. When comparing 401(k) plan service providers, most businesses like to review several options.

9 Over 90% of small businesses regularly review providers. Different service providers provide a variety of levels of service, charge a range of fees, and organize their administration of plans uniquely. Because there are many options when it comes to types of providers, and the levels of service they ll provide for certain fees, small business benefit from regular, thorough examinations of their 401(k) service providers and the value they re receiving. 70% of small businesses consider multiple providers when reviewing their 401(k) service and fees. The standard number of providers to review is three. Most businesses make provider review a regular part of plan management. What are small businesses looking for when they evaluate provider options? Ease of Management: Businesses want to work with providers who make it easy to administer a 401(k) plan. In fact, 46% of those surveyed reported that the ease of set-up and maintenance was the single most important factor when selecting a new provider. Competitive Pricing: The second most important factor was competitive pricing for different levels of service like self-service, in-person support, and additional options.

10 Small businesses shop online and in person. Provider research typically begins online, but most small businesses prefer to meet in person before making a decision.

11 Like many shoppers, small businesses like to learn as much as they can about the 401(k) marketplace using the web, sales materials, and personal references. But even in the digital age, many small businesses find that meeting with new vendors in person is the best way to arrive at a final decision. A combined 86% of businesses use some sort of face-to-face meeting to make a business decision, including office visits, meeting requests, seminars, and trade shows Meeting 401(k) provider candidates in person gives small businesses a unique opportunity to see a vendor at work, to get a sense for the promised level of service, and to help differentiate candidates as real people and partners from the mass of information they may have reviewed previously.

12 Most small businesses shop for providers the same way. In reviewing the results of this survey, a standard operating procedure emerges from the data.

13 Common Practices for Finding and Selecting a 401(k) Service Provider Most small and midsized businesses shopping for a new 401(k) provider: Conduct in-depth research on service providers by meeting them in-person after doing primary research on provider websites. Compare three or more service providers. Seek out service providers that focus on ease of set up and maintenance for employers, along with providing ongoing financial education for employees. Conduct a service review every 1-2 years to ensure a provider s offerings remain aligned with the needs of both employer and employee, and that fees remain fair for the services provided.

14 About Fisher Investments 401(k) Solutions Fisher Investments 401(k) Solutions is dedicated to bringing superior retirement plan services to small and mid-sized businesses and their employees. Fisher's unique service offering is built on 35+ years of successful wealth management experience and includes our flexible investing platform with actively-managed funds. Business owners will experience the benefit of ongoing support from a dedicated Retirement Counselor whose focus is making the management of a 401(k) retirement plan easier, while helping employees plan for a comfortable retirement. Questions? Call us at