While 401(k) plan sponsors continued to show no appetite to change their record keeper in July, awareness of the need for an experienced adviser remains very high. Only 2.21% of plan sponsors with less than $100 million in plan assets indicated that they were thinking of changing their record keeper or actively searching for a new one, while almost 11% indicated that they were likely to change their adviser.

Of the 3,000 plan sponsors surveyed by 401kExchange in July, 80% responded that they use an independent financial adviser, up from 75% in July 2008. Of the 20% of plans that do not use an adviser, more than 10% are considering hiring one.

The likelihood of plans changing funds remains robust, with just under 6% of plans likely to add or change their investment lineup, slightly down from this year's high of 7.77% in April.

Stay the course

Why are less than 3% of plan sponsors unwilling to change their record keeper as compared to almost 10% in 2005? Some of the reasons include:

* Platforms have more investment options, so there is less need to change record keepers to get new funds.

* Consolidation has driven out really bad providers.

* There is no magic bullet service or feature that causes a change.

* There is less incentive for advisers to force a switch.

* We're seeing commoditization of technology and service offerings.

Added to these reasons has been the disastrous stock market, which had been fluctuating wildly, causing sponsors to be afraid of being out of the market during the transitional black-out periods.

Even more important, companies that are laying people off and experiencing tough economic conditions are not likely to put changing their 401(k) record keeper high on the priority list. Additionally, having a competitive 401(k) plan is primarily important for attracting and retaining employees, which becomes less important during times of high unemployment.

A new adviser

At the same time that sponsors are reluctant to change record keepers, they are keenly interested in changing their adviser or hiring one if they do not have one. More than 80% of plans with an adviser use what is called a "blind squirrel," someone with a personal or business relationship with a decision maker, but little or no experience in managing corporate retirement plans.

In the past, concerns about fiduciary liability drove sponsors to move toward more experienced retirement advisers. The big driver these days is participants' concern about their anemic account balances and their ability to retire. An experienced adviser can set up better opportunities for participants to be successful in retirement and will even work with them individually.

Most important, experienced advisers show up every quarter to at least be available for plan participants' questions, even if they do not have all the answers. Advisers who can claim that they help participants to be more successful in retirement as measured by adequate income replacement - and have the data to prove it - will win almost every opportunity they get.

Dissatisfaction

The good news for advisers is that they can pick up broker-of-record opportunities even if the plans are unwilling to change their record keeper. The bad news, however, is that many plan sponsors are very dissatisfied with their record keepers, as evidenced by a 30% to 40% drop in satisfaction in the "401kExchange 2009 Mid Year Ratings and Market Share Report."

Despite their dissatisfaction, plan sponsors appear to be willing to suffer through the problems while handling more important issues. However, keep in mind that dissatisfied clients are more difficult to deal with, even if the adviser is not at fault fielding questions and fixing problems.

Advisers who ideally should have 80% of their business with two to three providers typically have a book of business that is unwieldy and disparate because of the many broker-of-record opportunities they have won. It is difficult for advisers to become familiar with the products and services of many record keepers.

The key to success for an adviser is based on the relationships with the wholesalers and home office support staff. It is difficult, if not impossible, to develop deep relationships with more than a few vendors.

Consolidate for strength

With slower sales and a much smaller asset base because of market declines, all record keepers - but especially the weaker ones - have fewer resources to support advisers and are not able to make needed capital investments.

As the dust settles and the financial markets continue to grow or at least stabilize, advisers would be wise to consolidate their books of business with a few good record keepers that support their business and seem able to withstand hard times.

While all the conditions are ripe for a greater percentage of plans willing to change record keepers coming into the September selling season, sometimes it takes an outside event like the mutual fund scandals in 2003 to motivate sponsors.

Until then, experienced and savvy retirement advisers will ride the wave of broker-of-record opportunities and the desire for direct sold sponsors to hire an independent and experienced retirement adviser.

Barstein, president of 401kExchange.com, can be reached at fbarstein@401kexchange.com.