Plan Sponsors Gravitating Towards Consultants
Plan sponsors continue to rely increasingly on their
consultants and custodians for risk management and
performance measurement services, and are
surprisingly less concerned with costs than is
widely believed, according to the recent PLANSPONSOR/The
Bank of New York Research Study on Risk Services.
The survey said that although cost has been seen as
a hurdle for providers of risk management and
performance measurement services, the 167 plan
sponsors interviewed said, when asked to rank the
most important criteria in a risk services provider,
pricing was the least important (just 12% of
respondents ranked it first among four criteria
listed). Similarly, when asked what is most
important in their custodian relationship, pricing
was cited again as least important (just 7% of plans
said that pricing was paramount).
The most important factors on plan sponsors' minds
were: Product Capability: 63.5% of plan sponsors
ranked it first among four criteria. People: 31.7%
of plan sponsor respondents ranked it first among
four criteria , while 32.7% surveyed said it (and
the client service team) is the most important
factor in determining a custodian's value.
Technology: 17.4% ranked it first among four
criteria and 23.0% of plan sponsors said it is most
important in the relationship with a custodian.
Comprehensive Range of Services: 35.8% of plan
sponsors said it is most important in assessing the
value of their custodian. About 68% of respondents
say consultants are perceived to offer the best risk
services, while 15.3% of plan sponsors said that
about custodians. The vast majority of plan sponsors
use either their consultants or their custodians to
perform their risk and performance analysis
services: 89% of plans use consultants or custodians
for Performance & Analytics. In the past,
consultants were the major players in this space,
but the survey showed a trend toward usage of
custodians in this arena - 55% of respondents who
have increased risk services used from custodians
added Performance & Analytics to the list.
There are still some areas where plan sponsors are
slow to hand over control and integration of
products, the survey showed. For example, in the
area of Compliance Monitoring, 38% of plan sponsors
perform this function in house. Of the plans that do
outsource this function, most (58%) use their
consultant or custodian and the growing complexity
of compliance is likely to oblige more and more plan
sponsors to look at outsourcing. Plan sponsors
showed a desire to understand where they rank among
their peers with more than 70% of the survey
respondents indicating that universe comparisons
were either "Useful" or that they "Can't live
without them." In early March 2004, 167 responses
were collected from plan sponsors to a questionnaire
designed to better understand how institutional
investors rely on risk management services (e.g.,
performance measurement, VaR, etc.) and how
providers can better meet their needs. The
questionnaire, developed jointly by The Bank of New
York and PLANSPONSOR, consisted of 22 questions on
which risk services are used, which types of
providers perform these services, how they are
delivered, and how useful the services are to plan
sponsors.
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