Perhaps no function is as integral to the successful operation of a plan as that of the recordkeeper – both good, and bad. This week we asked NAPA-Net readers to weigh in on the good, the great, the bad… and the ugly.
Indeed, nothing can so completely or rapidly sour a relationship as bad recordkeeping, and therefore it’s no real surprise as to what the advisor-respondents to the 2019 NAPA Summit Insider said was their primary consideration in selecting a recordkeeper.
It seems fair to say that the experience of this week’s respondents is broad, if not deep – roughly two-thirds worked with more than five recordkeepers, and one in five worked with four or five. In fact, several provided numbers that were well in excess of five (“way too many,” commented one reader).
“We have a handful that we prefer to work with due to product efficiencies, available tools, open architecture menus and non-proprietary menus,” explained one reader. “We do take over plans with current recordkeepers (even if they are not an ‘ideal partner’) and work with them to make the offering more efficient while we help educate on outside providers. Some employers/plan sponsors retain the recordkeeper due to comfort with the process and system and adopt our suggestions to make it a more efficient solution.”
“Rather than upsetting the applecart when I take over a new plan, I like to see if I can make the current one better,” noted another. “This has resulted in a Plan here, a Plan there. I know it is a less efficient use of my time, but it’s not about me, it’s about the Plan sponsor and participants.”
That said, nearly as many (64%) said they had fired or quit working with a recordkeeper during the past two years, and another 8% said they would have, if it had been up to them, and a like number had threatened to quit working with a recordkeeper. “I have been frustrated with two recordkeepers, but changing platforms is cumbersome and I am reluctant to knock over the apple cart as you never know what else is going to happen,” noted one reader. “We got rid of several platforms a few years back. In some cases, clients that wouldn't change record keepers needed to find a new advisor,” explained another.
Separation ‘Anxieties’
The reasons for those separations are myriad, according to respondents:
44% - fees/pricing
36% - incorrect/inaccurate results/reports
36% - inferior technology
32% - staff turnover
31% - inflexible process
27% - missed deliveries/deadlines
19% - inadequate website
11% - personnel clashes
However, asked to single it out to a primary reason for terminating a relationship, key selling points like technology and the website (or, more precisely, inferior technology and an inadequate website) dropped like a rock.
25% - fees/pricing
12% - incorrect/inaccurate results/reports
11% - inflexible process
9% - missed deliveries/deadlines
7% - staff turnover
3% - personnel clashes
3% - inferior technology
2% - inadequate website
One reader called out a couple of recordkeepers that “…have both tried to circumvent our practice and have the servicing agreements directly with the clients. The clients did not make this change and, quite frankly, were put off by the suggestion.”
Or, as another explained, “Some recordkeepers promote the hell out of THEM and not the advisor.”
“It has been an ongoing matter that finally came to a head,” noted another. “I tell clients that this is a long-term relationship and there are always potential issues, and that there is no need for a change if there is a minor issue(s), but when they do nothing to resolve them, blame everyone else, and continue to happen then it was time to make a change.”
“It typically takes a number of issues for us to terminate a record keeper. When the record keeper is a problem for the plan sponsor, the record keeper has to go.” Another noted, “lack of responsiveness, which greatly affects our deliverables to clients. On occasions the client blames us for the recordkeeping issues.”
Termination ‘Causes’
In fact, we got a lot of comments about the factors behind terminating those relationships, and reader experience(s) in those situations. Here’s a sampling:
I have not liked – but have not terminated – the level of service and lack of responsiveness from one of the recordkeepers, especially regarding their own billing. The client had a past due balance but didn’t know. They let the past due balance go 6 months without contacting them and when they did finally threatened to stop service. It could have easily been avoided. Client didn't understand their platform.
Service level, knowledge level, communication skills, and desire to serve the plan sponsor (and us) is paramount. We serve with excellence and expect nothing less from our partners.
Some recordkeepers see the advisor as the means to gain participants to gather assets.
Service and knowledge is the most important thing. I felt really bad about moving the plan because the account rep is very good but his firm would not get even close to several quotes we received. They did not have to be the lowest but just get somewhat close.
It would seem that the proverbial “race to the bottom” is on among most RKs, both in servicing and pricing.
I do believe record keepers should have conversations with plan sponsors/consultants about services and ways they can work better together at least every 2 years. So many providers only want plan sponsor meetings to offer new services or have their own agendas and not give plan sponsors a chance to tell them where they need better help and can be better partners.
I think providers are really starting to separate from the best where they provide plan design, consulting and access to an ERISA attorney to those that only want to provide administrative services and not come close to the fiduciary role.
I wish recordkeepers would do a better job recognizing they have two sets of clients: the plan sponsor AND the financial advisor.
We are only the advisors on the 401k plans, the sponsors or trustees have to be happy with who is representing them.
The relationship manager (the person I work with most) also needs to know exactly where to get answers that they do not immediately know. They need to be very familiar with the internal resources of the RK they work for.
We do see a trend in the micro-small plan market of recordkeepers providing less service and moving more to a call center environment which leads to frustrated clients and inconsistent service and the potential for errors.
The number of plans that are being assigned to the servicing teams seems to be increasing which is impacting client servicing.
Too often the record keeper is like an 800 number to nowhere. Service is inadequate. Problems that are difficult can linger for years.
Leveraging technology seems to have limited staff ability to intervene and adjust to specific client issues. Too much functional processing has diluted ability to quickly respond to clients.
There is a race to the bottom on fees that is a bit concerning to the long term health of the industry. Hopefully technology will keep the nose above the water line. It doesn’t bode well for smaller recordkeeping firms. While I have heard this over and over for 25 years now, I do believe that it is finally becoming a reality due to automation and security costs that needs to be spread against a large participant base.
Acceptable response times plus quality answers. If they need to look into something, because they don't know off the top of their head, they should say so and provide a reasonable time line for response.
Being accurate and timely is table stakes. Service becomes the next differentiator. If my client can't get a return phone call, and I get pulled in to resolve an issue – that's a big problem for the recordkeeper.
Too much technology, not enough personal touch. Overly sensitive to lawyers’ needs.
One of my biggest concerns is RK's that don't disclose advisor compensation even though it is being paid from the plan trust. This is absurd to me. They often claim that use of ERISA buckets or Plan Expense Reimbursement accounts is the reason – but their trust is sending payments and they should be able to disclose this. It requires additional documentation or addendums to the fee disclosure and many plan sponsors do not verify the information is complete or accurate. It is a big issue that needs to be corrected.
What we have consistently found, across the 7 different recordkeepers that we currently share more than 3 clients with, is due to cost compression, all service models are striving to do more with less. There tends to be a lack of empathy with plan sponsors who don’t do this for a living, particularly in the small to mid market space. Client service representatives dump lengthy emails on plan administrators, some that require a call to action and some that are merely disclosures, but the client has a difficult time determining which is which. Meanwhile, calls to action get overlooked, while the client service representatives walk away since they feel that they have done their job, completed their job, simply because they sent the message. They lack the emotional/social equity needed to ensure the client received the message, understood the message, and acted on the message. The good news is that this has created another opportunity for us as advisors to add value to the client relationship, by intervening and advocating for the plan sponsor client.
Fee compression had surely taken a toll on quality
Our team takes a very active role working with the plan sponsor, TPA and recordkeeper. We typically are looking for solutions to a problem when we contact the recordkeeper more than we are looking for guidance on plan design or contract provisions. At the end of the day, it comes down to the service we and the plan sponsor are receiving from the recordkeepers.
I would love more proactive communication regarding mid-year testing. Look at my plans and spot problems. Do not just be a passive receptacle for deposits. And if the deposit amount looks odd, TELL ME!
Some clients have been very upset about how aggressive the recordkeepers are in soliciting employees that are eligible for in-service or other distributions. Many are upset because they don’t seem to help them follow plan document. Operational errors that seems like systems should have caught.
It’s hard to keep recommending a certain recordkeeper when their staff may be knowledgeable but their communication skills are awful.
We want a quality recordkeeper which is devoted to the RK service and not trying to push their mutual funds.
Service and response times are number one for us. There is getting to be sufficient parity in pricing and investment chassis flexibility (with some exceptions) that customer service stands out more than ever.
Generally, we like to consolidate our relationships with RK firms because it makes our lives easier. We build custom models so that technology is deal breaker. Service, transparency of pricing and investment availability are all key decision points for us.
More ERISA support and guidance around corrections would be ideal as that is what employers need... the recordkeepers have all the data, so it would make the process that more streamlined
Quality Controls?
On that front, and since the quality of recordkeeper staff/service had such an impact, we asked readers to weigh in on… the quality of that support. As you might expect, there was quite a range of perspectives. A slight plurality (36%) found those they work with to be “about as knowledgeable as they’ve ever been,” while another quarter said they were “very knowledgeable” about the plan(s) and legal requirements.
On the other hand, 17% said they “aren’t as knowledgeable about plan(s) and legal requirements as they used to be” – and another 22% said not only were they not as knowledgeable as they used to be – but that it was “getting to be a problem.”
The reality is – and this showed up throughout this week’s reader poll comments – some recordkeepers are better than others, and some of the staff at the recordkeepers are better than others. That, and as often as not, the decision to keep – or terminate – a relationship with a recordkeeper isn’t wholly within the purview of the plan advisor. Check out the comments for a flavor of what I’m saying:
In general we find that our contacts are nowhere near as familiar with their internal procedures as they should be.
The good day to day people at recordkeepers get promoted to different roles, it tends not to be a destination spot for staff who work at recordkeepers
The biggest by far is personnel clashes. There is a growing lack of respect at the recordkeepers for the role of the advisor and also the lack of communication with the client.
Overall turnover and lack of knowledge (or bad knowledge) lead to a change.
i don’t go to an RK for help with legal requirements b/c their answer seems to always be we can’t give legal/tax advice. I depend a lot more on TPAs.
We find that the good and great relationships are being identified and pulled into different roles creating the need to reintroduce the plan and process to a new relationship every couple of years, some more often. It takes a long time to learn the industry, coupled with learning plan specifics leads to frustrations.
While there are still a good number of knowledgeable account associates, at the same time many large recordkeepers have downsized staffing, while not recruiting and educating new personnel sufficiently.
Depends on plan size. Plans of $5M-$7M or less are sometimes served by individuals who are essentially clerks. There is no relationship between the recordkeeping staff and the client. Plans with $20M+ are supported by knowledgeable staff.
I would say knowledge overall has been relatively the same. That hasn’t been the problem.
More often than not, they know the platform and the scripted screen. very few have professional credentials.
I would say on legal, they usually do not respond, but with plan design related issues, it is inconsistent for me. Large market RKs are knowledgeable, but smaller market tend to not be.
Most RKs hire properly trained and knowledgeable staff.
It’s pretty variable though, the knowledge can vary wildly from person to person. There are plenty of staff who have zero idea.
Industry-wide they lack knowledge/experience but we choose to work with those who are better.
It depends on the RK. Some are excellent, some I wouldn’t trust handling a calculator; I’m pretty good at making up for the deficiencies on the latter so there is no impact to the client.
Record keepers seem to be growing so quickly they cannot keep up with staffing and training.
This varies depending on the plan size and the actual RK.
In the race to cut costs, they appear to have cut expertise. On many platforms, when a problem occurs, there is no one capable of fixing the problem unless we escalate to management. Even then, some things seem to be not fixable.
As a whole, they have never been that knowledgeable on the servicing front end. You must find the few that are and demand to keep them on your accounts. However, this does support our highly consultative approach, as plan sponsors learn that they need someone advising them that has expertise on both investment and plan administration issues.
This is not the case with every provider, but it has been the case with some, and those relationships are have been changed or are in jeopardy.
It seems that the RKs we work with are working to maintain quality and standards in their relationship managers and there is not just a general number we work with. We are getting dedicated RMs who know us and our clients and understand the complexity of a retirement plan.
They don't seem to be current with recent regs.
Really, it’s a mixed bag. The good ones are quite good; the bad ones are maddeningly so.
My current team is amazing! They are definitely the most knowledgeable and responsive team I’ve worked with in the last 30 years. Over the years I’ve learned not to rely on my recordkeeper in many areas, but this recordkeeper has changed that mindset.
There is a general industry trend that the relationship managers are not as knowledgeable and competent as they used to be. This is directly tied to providers aggressively lowering their fees to the point of having to compromise services.
The relationship managers seem incredibly overworked and don’t seem to have the necessary support they need. In general, few are proactive or strategic.
We rely on the unbundled TPA for the plan document expertise but also rely on the recordkeeper to program the system according to regulatory requirements, so that part is “so-so.”
We are having increasing issues with bundled providers getting so big, that their compliance and recordkeeping quality has dropped. We are trying to add TPA partners whenever possible for additional support. Turnover has been a drain on institutional knowledge and the learning curve starts over. With growth, processes are not consistent or they are constantly changing, so that intended support services actually undermine the service provided.
We have this one new primary contact who can’t answer anything immediately – it's always, “let me look into that and get back to you.” Every. Single. Time.
Each firm has good and not so good people. In general, certain firms have a higher level than others.
Varies widely on plan size/segmentation. Smaller end of the market (sub $25m plans) have more issues here because most RMs/AMs have too many clients.
Thanks to everyone who participated in this week’s NAPA-Net Reader Poll!
p.s. the winner of our lottery for the free registration to the 2020 NAPA 401(k) Summit is Jeremy Weith with Sheridan Road Financial!
