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Recalcitrant Prospects: A Growing Trend?

September marks the start of the heavy DC plan selling season. Advisors’ chief concern: Plan sponsors will delay making a decision, for myriad reasons. Though it’s easier to get an AOR change than it is to switch record keepers, any type of decision can cause some plans to delay unless there’s a lot of pain involved. The reasons for delay are heightened during tumultuous times, when other decisions seem more crucial — like the recent financial crisis, for example — or during really good markets when making a change seems unnecessary.

Then there are more long-term trends, like the maturation of a market. That’s what happened to record keepers five years ago, when consolidation weeded out bad record keepers and service quality improved among the survivors. Rarely does a new “silver bullet” feature or service emerge and, when it does, most providers seem to have it quickly.

Of course, when a provider exits the market or is sold, it can cause a feeding frenzy, depending on the circumstances. Changes in regulations, like last year’s fee disclosure rules, can have an impact too — but less than what one might expect.

Though the plan advisor market is about 10 years behind, it’s beginning to mature — though in different ways, as seen in recent research by Fidelity.

Does this season seem different compared with last year? Are more plan sponsors delaying the decision whether to change record keepers or advisor? If so, what reasons are prospects giving? What do you think are the real reasons?

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