Market Strategies International released on Monday a survey explaining defined contribution plan sponsors’ priorities when it comes to choosing a recordkeeper.
While there are several factors in choosing a partner, Ellie Bond, product director for MSI and lead author of the report, noted that education and support — both for the sponsor and the participant — were important differentiators.
Namely, small plans are most looking for personal attention — think someone who will visit their office to educate participants — and large plans need help with features like auto-enrollment and auto-escalation.
The qualitative survey follows up on one finding from an earlier Retirement Planscape report that found plan sponsors cite being “easy to do business with” as the most important factor when selecting a plan provider.
First, though, Bond noted the role consultants play in directing sponsors’ attention to a particular provider.
“Plan sponsors are very up-front about the fact that they all rely heavily on investment consultants and financial advisors and their input in order to help them narrow down the field” of recordkeepers, she said. “They know that they need to have that level of input on a quantitative basis to say, ‘You help me screen this field of an inordinate number of people. Help me get it down to a core group that are going to be suitable to me that I can consider.’”
When they whittle down their options to a short list, that’s when chemistry and trust play a role, Bond added.
Bond compared the process of evaluating a new recordkeeper to a job interview. “People are coming in, we’re seeing how well we work together,” she said of the process. “There are going to be times when we’re going to be in the same room as one another working on a project together, and we need to know that we have that rapport and can work together efficiently.”
Last year, MSI did a separate qualitative study of investment consultants about the importance of chemistry, finding a “very similar story” to the one that surfaced in the current study, Bond noted. “They were saying, ‘As much as I’d like to think it was entirely me making the decision, you do have sponsors coming in and they will judge some things on how well that chemistry works.”
The report asked respondents to list what they find important from the recordkeepers they work with. “Unsurprisingly, low fees was one of the principal table-stakes,” Bond told ThinkAdvisor on Monday. “Participant administrative support [was] absolutely key; almost more important than sponsor administrative support because they felt, ‘If my participants are happy and their administrative support is being taken care of, that actually takes almost more off my plate.”