Plan Sponsor Satisfaction Does Not Ensure Advisor Loyalty, Study Shows

While plan sponsors express a high level of satisfaction with their retirement advisors, that satisfaction does not necessarily translate to commensurate levels of loyalty, according to a new white paper.

Chatham Partners’ study, “The 2017 Advisor Cx,” which looks into plan sponsors’ perceptions of their plan advisors, suggests that this gap between satisfaction and loyalty provides an opportunity for advisors to evaluate and improve their product and service offerings. The findings are based on a survey of a cross-section of plan sponsors and a proprietary “loyalty algorithm” that helps identify clients at risk of leaving.

Overall, the study shows that plan sponsors are generally satisfied with their plan advisors, with 81% of respondents rating their overall satisfaction in the top two rankings on a 7-point scale. Interestingly, mid‐sized plans ($10 million‐$50 million) and plans where the advisor does not function as a fiduciary emerged as having a lower overall satisfaction rate (75%) than small plans and large plans, which both registered at more than 80%.

The study warns, however, that a large portion (60%) of plan sponsors are “neutral” toward their retirement plan advisor and nearly one in five respondents are classified as “at‐risk” accounts, leaving only 22% of respondents who are considered “loyal” clients. “In our opinion, the sizeable neutral zone represents a wide swath of plan sponsors that are less than loyal to their advisors and could be ripe for renegotiating current relationships or even changing providers,” the authors say.

The report suggests that advisory firms should assess their current books of business and strive to ensure their most “profitable and strategically important customers are loyal” and recognize the value of their offerings, while taking steps to address concerns of identified “at‐risk” accounts.

Plan Sponsor Success

Advisors’ quality of contact, ability to help manage plan sponsor success and fiduciary support received high rankings among plan sponsors in the 80% range. Once again, however, mid‐size plan advisors and non‐fiduciary retirement plan advisors received lower scores than the industry as a whole.

Among the components of managing plan sponsor success, the report notes that mid‐size and large plan sponsors reported considerably higher ratings than small plan sponsors for satisfaction with investment menu reviews by advisors, while mid‐size sponsors offered the lowest ratings for satisfaction with plan fees and expense reviews, as well as plan design review.

Managing participant success also emerged as an opportunity for improvement, with a lower top-two box score of 73%. The study emphasizes that the quality of an advisors’ communication is of “crucial importance for plan sponsors,” but advisors need to expand efforts beyond customary service contact points.

Areas where advisors can likely enhance their value include adding communication and thought leadership strategies to assist with increasing participant savings rates, automating enrollments, improving diversification strategies, augmenting financial planning strategies and customizing target date product offerings, the report suggests.

Chatham emphasizes that there is an opportunity for advisory firms that service mid-size plans and/or choose not to act as a fiduciary to differentiate themselves from their peers by making targeted efforts to address shortfalls perceived by this client base.

Brand Attributes

When looking at brand attributes, the findings show that the results are a mixed bag. Service related attributes, such as treating clients as important, ease of doing business and range of services offered, received strong marks, with top-two box scores of 79% or higher. Conversely, only two-thirds of respondents strongly agree that their advisor proactively offers new ideas and solutions or is innovative — below levels that ensure deep satisfaction or loyalty, the authors contend.

The online survey was conducted in the second quarter of 2017 and consisted of more than 100 employer plan sponsors representing a cross-section of plan sizes by assets. In addition, respondents were required to be knowledgeable about the products and services offered within their retirement plan, have decision‐making authority and utilize a retirement plan advisor.

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