For years pension officers who run defined benefit plans have been much more comfortable using consultants than their counterparts at defined contribution plans. But the 401(k) crowd is coming around. According to this month’s Pensionforum, 50 percent of defined contribution plan respondents say they use a consultant to help them make investment decisions. Just 37.3 percent say they did so five years ago.
Nearly 90 percent of defined benefit plan respondents say they use a consulting firm, versus 83.6 percent five years ago. Those defined benefit plans utilizing consultants tend to keep one of them close at hand: 79.4 percent say they keep a consultant on retainer to handle all duties.
The most popular consultant assignments? Performance measurement, manager selection and monitoring and asset allocation studies. Most defined benefit plan officers seem to resent the fact that consultants sometimes offer their own money management services: 67 percent of respondents say it is a conflict of interest for them to do so. And respondents are putting their money where their mouths are: Just 6.5 percent say they purchase services from consultants who also manage a portion of their assets.
Defined contribution plans appear less wedded to using one consultant for most duties: Only 51 percent keep a consultant on retainer.
Roughly 46 percent report that consultants share fiduciary responsibility, compared with 54.7 percent of defined benefit plans.
Consulting firms should keep doing whatever it is they’ve been doing, because their clients appear satisfied: 93.8 percent of respondents say their consultants are doing a good or excellent job. And 47.9 percent say consulting services have improved slightly or significantly in recent years.
Defined benefit plans:
Do you use a consulting firm to help with investment issues?
Yes 89.1%
No 10.9
Did you use a firm five years ago?
Yes 83.6%
No 16.4
Do you keep one consultant on a retainer to handle all duties?
Yes 79.4%
No 20.6
What services are provided by your consulting firm?
Performance measurement 88.0%
Manager selection 90.0
Ongoing manager monitoring and information 91.0
Asset allocation studies 91.0
Establishment of investment objectives 72.0
Money management 5.0
Investigation of specific money management techniques 40.0
Databases 42.0
Organizing conferences 7.0
Advice on government relations 1.0
Auditing 2.0
Other 3.0
If you hire the money management arm of a consulting firm, do you also use that firm for consulting services?
Yes 6.5%
No 93.5
Is it a conflict of interest for a consulting firm to offer money management?
Yes 67.0%
No 12.3
Can’t say 20.8
Does your consultant share fiduciary liability?
Yes 54.7%
No 45.3
Defined contribution plans:
Do you use a consulting firm to help with investment issues?
Yes 50.0%
No 50.0
Did you use a firm five years ago?
Yes 37.3%
No 62.7
Do you keep one consultant on a retainer to handle all duties?
Yes 51.0%
No 49.0
What services are provided by your consulting firm?
Performance measurement 70.6%
Manager selection 82.4
Ongoing manager monitoring and information 82.4
Asset allocation studies 35.3
Establishment of investment objectives 50.0
Money management 8.8
Investigation of specific money management techniques 11.8
Databases 35.3
Organizing conferences 5.9
Advice on government relations 2.9%
Auditing 0.0
Other 2.9
If you hire the money management arm of a consulting firm, do you also use that firm for consulting services?
Yes 8.8%
No 91.2
Is it a conflict of interest for a consulting firm to offer money management?
Yes 56.3%
No 18.8
Can’t say 25.0
Does your consultant share fiduciary liability?
Yes 45.7%
No 54.3
Defined benefit and defined contribution plans:
How would you describe the quality of your consulting services?
Excellent 49.5%
Good 44.3
Fair 6.2
Poor 0.0
In recent years, how do you think the quality of consulting services has changed?
Improved significantly 7.1%
Improved slightly 40.8
Stayed the same 41.8
Gotten slightly worse 4.1
Gotten significantly worse 0.0
The results of Pensionforum are based on quarterly surveys of a universe of 800 corporate and 250 public pension plan sponsors. Because of rounding, responses may not total 100 percent.
