It’s crunch time for defined-contribution plan providers.
Plan advisors are currently recommending an average of 2.2 providers to prospective clients, according to a Cogent Reports study by Market Strategies International, released Wednesday.
The report said 39% of DC advisors now recommend just one plan provider for clients’ consideration, up from 32% that did this in 2015.
“With nearly four in 10 DC advisors recommending just one provider, achieving that coveted spot on advisors’ recommended list has never been more daunting,” said Sonia Sharigian, senior product manager at Market Strategies and the report’s author.
“Moreover, the implications of securing a spot on DC advisors’ consideration sets can be huge — as these advisors work with an average of just 2.6 plan providers across all of their DC business.”
Cogent Reports conducted an online survey in August of a representative cross section of 508 plan advisors that were actively managing DC plans.
The study found that two chief brand consideration drivers were critical among established DC producers — financial advisors that partner with sponsors and help recommend plan providers to companies for their 401(k)s — managing at least $10 million in DC assets:
- Easy to do business with — also a big detractor if it is perceived to be missing
- Best value for the money, a leading brand differentiator
These considerations mirrored those reported among DC plan sponsors.
“The fact that these consideration drivers are similar across both audiences is a testament to the level of influence retirement plan advisor recommendations have in the DC market,” Market Strategies senior vice president Linda York said in the statement.
York noted that a mere handful of providers were strongly associated with the two key attributes.
“Challenger brands need to find another niche if they hope to break the hold of these dominant market leaders,” she said.
Following are the top five DC plan providers associated with each of the key consideration drivers among established DC plan advisors:
Easy for advisors to do business with