Plan sponsors appear to be souring on the service provided by their retirement service providers, perhaps because their expectations are rising, according to a new report.
The percentage of clients who were classified as “loyal” using Chatham Partners’ proprietary loyalty algorithm dropped from 61% in 2014 to 57% in 2015, while the proportion of clients classified as “at risk” increased from 13% to 15%. The firm’s Provider Loyalty Index measures loyalty among plan sponsors with decision-making authority for their organizations’ retirement plans, and is calculated based on insights from more than 11,000 plan sponsors.
In addition to the slip in plan sponsor loyalty, Chatham Partners also observed a decline in sponsors’ willingness to actively endorse their retirement providers — a decline they characterized as “slightly more pronounced.” According to the report, the proportion of plan sponsors that are considered to be “promoters” of their providers has declined by 6 percentage points, while the proportion considered to be “detractors” has increased 3 percentage points.
Chatham explains that a more detailed analysis of attributes which are highly correlated to satisfaction and loyalty suggests that these declines in plan sponsor loyalty are largely driven by plan sponsors’ perceptions of their providers’:
• ability to execute on key aspects of service delivery; and
• efficacy in helping them meet plan goals.
The top 2 box score for the attribute “provides high quality service” (the percentage of respondents providing a rating of 6 or 7 on a 7-point scale) has declined 12 percentage points from the 2014 score (73% vs. 85% in 2014); and significantly fewer sponsors agree that their retirement plan provider helps to reduce their administrative burden (68% top 2 box score in 2015 vs. 79% in 2014).
Additionally, scores for other key touch points strongly correlated to overall satisfaction and loyalty have experienced notable year-over-year declines, with plan sponsors considerably less likely to agree that their provider:
• offers solutions to plan objectives and goals (67% vs. 76% in 2014);
• helps fulfill fiduciary responsibilities (77% vs. 84% in 2014); and
• is committed to technology (71% vs. 78% in 2014).
Chatham notes that this decline in loyalty measures and key attributes correlated with satisfaction and loyalty suggests that plan sponsors’ expectations of retirement service providers have increased, especially as they relate to assisting sponsors in meeting plan goals and fiduciary responsibilities.
