August 10, 2010
Substandard service spurs switching
Contrary to what advisors may believe, poor service, rather than poor performance, drives small-plan sponsors to switch providers. Only 50% of plan sponsors cited investment performance as a critical reason for initiating a search. Compare this to the 92% who indicated that poor client service was a main motivator of attrition, and the nearly two-thirds who would switch providers because of substandard participant education resources and lackluster fiduciary guidance and assistance.
Lessons to be learned
While incumbent plan providers may find temporary solace in knowing that less than 25% of plan sponsors are either in the process of switching providers or planning to do so in the next three years, the reasons often have more do with organizational inertia than with genuine satisfaction. In fact, many respondents indicated that they would like to switch providers but that today’s challenging business environment has made that process a low corporate priority.
Yet, as economic conditions improve and companies begin to add employees, a growing number of companies are likely to initiate searches. This percentage should jump in 2013, as companies scramble to get their benefits in order to accommodate the mandatory coverage provisions of national health care reform that are scheduled to go into effect in 2014. Companies seeking to cut costs and consolidate services will become attractive targets for firms that can lead with consultative selling in all areas of benefits administration, including retirement plan management. TPAs and other benefit firms are likely to expand relationships with financial advisors who can provide ERISA fiduciary assistance.
Advisors who are willing to shoulder these challenges and assume a far more proactive role as their clients’ trusted retirement advisor stand a far better chance of winning and retaining these clients than those who remain stuck in outdated and increasingly irrelevant service models designed to on push investment products instead of focusing on addressing plan sponsors’ needs.
About the Author
Jeff Briskin is President of Briskin Consulting, which provides strategic marketing, branding, creative, and sales support services to asset managers, wealth management firms, and retirement plan providers. His research study, The Briskin Consulting Study of Small-Retirement-Plan Sponsors can be downloaded for free here.
He can be reached at .
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