According to research involving DC plans with over $6 billion in assets conducted on behalf of advisors by Chatham Partners — famous for their provider win/loss studies — 81% of plan sponsors sought advisors through referrals, with very few responding to cold call solicitation. An average of five advisors were selected for each opportunity. Personal fit was cited most often as the criterion for selecting an advisor, followed closely by pricing and experience, with personal relationships a distant fifth.
According to Warren Cormier, president of the Boston Research Group and founder of the DCP studies, generally record keepers:
• are invited to participate in an RFP based on reputation;
• make it to the finals based on their capabilities; and
• are selected based on relationships or personal fit.
With only 45 national providers and usually 7 to 12 that can truly service any particular plan (usually based on market size), most of the national providers see the most opportunities because of their healthy marketing and advertising budgets. Their issue is trying to distinguish their services in what is considered a commoditized market while maintaining reasonable price points. Advisors have the opposite issues — so many of them have limited marketing and advertising budgets that getting in front of a prospect at the right time is the major issue.
The good news: Only 5% of plan sponsors use personal relationships to select an advisor to the finals. The bad news: Plan sponsors are very price sensitive, with cost cited most often as the reason advisors lose out.
The Chatham studies were sponsored by Franklin Templeton on behalf of their advisor partners. Franklin also created a white paper available on their recently released advisor resource center.
