Plan sponsors feel less loyal to their retirement service providers, according to an annual index produced by research firm Chatham Partners. The 2015 index, released Tuesday and based on responses from 11,000 sponsors who together work with about 15 providers, shows that the percentage of sponsors loyal to their providers fell four points since 2014 to 57%. Fifteen percent of sponsors were considered at risk.
In addition to being less likely to stay with their provider, sponsors are also less likely to recommend them. The percentage of sponsors who actively promote their retirement provider fell from 66% in 2014 to 60%.
Chatham attributed these declines to lower quality service and declines in providers’ ability to help sponsors meet key goals. Although overall satisfaction fell only one point to 77% and 74% say their provider offers good value for the money (down from 76%), the percentage of sponsors who said their plan provider offers high-quality service fell from 85% in 2014 to 73%.
Peter Starr, CEO of Chatham, said that in some respects, the results are unsurprising. “We know plan sponsors are becoming harder graders. The risk associated with sponsoring a retirement plan in the past couple of years has increased, if not in actuality then certainly in perception; defining who a fiduciary is, defining what diligence you need to be doing on investments, defining what advice you should be giving to participants,” he told ThinkAdvisor on Wednesday.
A few years ago, he said, plan sponsors might have said, “‘Hey, participants really don’t seem to be that upset, and no one’s at my door with a lot of questions. Things are good.’ Now they’re very concerned: ‘Are we documenting properly? Have we applied the right amount of fiduciary oversight to how we select providers and investments?’”
However, he added that some service providers have anticipated changes in fiduciary oversight, required disclosure and the need for better pricing, and that it was a surprise to see those preparations not reflected in the scores. “As an industry, it did highlight that there has been a retrenchment in crucial areas of plan sponsor engagement,” Starr said. For example, 68% of sponsors said their provider helped reduce their administrative burden, down from 79%; 77% said they helped them meet fiduciary responsibilities, down from 84%; and 71% said their provider was committed to technology, down from 78% in 2014. Two-thirds said their provider offered solutions for their own objectives and goals, down from 76%.