Amid Distrust, Plan Sponsors Trust Advisers

Trust in service providers dropped below last year’s levels, according to the Second Annual Plan Sponsor Trust & Confidence Study by the National Association of Retirement Plan Participants (NARPP). This year, the study asked a series of questions related to trust in retirement advisers. Just one in five plan sponsors (20%) said they generally trust retirement advisers to “always do the right thing.” However, trust in their specific adviser is higher, at 71%,

What builds adviser trust for a plan sponsor? NARPP wanted to understand the trust factors—ones that build as well as erode trust—in the plan sponsor-plan adviser relationship and identified five practices or characteristics. Next to each is the percentage of plan sponsors that strongly agree when asked about their current adviser:

• Completely lives up to promises (44%);
• Values plan sponsor business (53%);
• Follows through on requests (53%);
• Cares about the long-term financial security of participants (49%); and
• Understands plan sponsor’s needs (45%).

When it comes to other providers in the retirement space, plan sponsors continue to express deep pessimism about service providers, with trust in financial institutions at 8% (a slight dip from 2014’s 9%) and trust in their current plan provider at 58%, a loss of seven percentage points from last year’s 65%. Survey respondents assessed their trust in a provider by agreeing with the statement they “can always trust their provider to do what is right.”

The low numbers mirror the general public’s confidence in financial institutions, according to Laurie Rowley, president and co-founder of NARPP, “which is quite low. Surveys by Pew Research and Stanford University, among others, show the general public’s trust in financial institutions hovers in the 10% to 11% range.”

In fact, she says, there seems to be quite a pall over the defined contribution (DC) industry, where people have more personal experience with financial institutions, including recordkeepers. In NARRP’s survey, trust scores for plan providers range from a high of 74% to a low of 24%, so there’s clearly room for improvement, Rowley tells PLANADVISER, “especially if plan sponsors consider the factors that both build and erode trust: accountability, following through on promises, and understanding needs of the plan sponsor and employees. “

While trust in service providers dipped lower below those in the previous study, Rowley believes there’s an opportunity to open the floor to discussions on ways to improve.

Critical Trust Factors

“I can’t think of a factor that’s more important than accountability and reliability,” Rowley says. “And that’s where the conversation needs to shift, to how well the provider is doing the job.” Plan sponsor dissatisfaction with a service provider can be an opportunity for discussion, the basis for a conversation between plan sponsor and recordkeeper to see how services to participants, for example, can be improved. “If you’re having a problem with education or service, the plan sponsor can point it out,” she says. Change won’t take place immediately, Rowley says, but the more people talk about it, service providers are going to have to level up their game.

The top factor for plan sponsors for choosing service provider is trustworthiness, which scores higher than participant customer service, quality of the customer experience, technology, education, administrative service and cost.

Calculating trust starts with the plan sponsors’ opinion of service provider competence, Rowley says. Can the service provider do the job they’re supposed to do? To assess actual trust, the survey asked plan sponsors to describe the amount of trust they have in financial institutions as well as their current service providers: “How much of the time can you trust financial institutions to do the right thing?”

Rowley notes that building and restoring trust with both plan sponsors and consumers should be a top priority for financial institutions because of its unique and critical role in participant savings behavior.

The study’s data challenge some of the more traditional aspects of what drives loyalty and satisfaction, according to Rowley. “Trust is the bedrock of every brand,” she says. “It is key to participant engagement, and it is the most important selection and loyalty factor for plan sponsors.”

The top-rated service providers for 2015 are: Vanguard; Wells Fargo and Charles Schwab (tied for second place); and Transamerica.

The 2015 study includes measurements for:

• Trust levels with retirement advisers;
• Efficacy of service providers’ education programs;
• Attitudes about fees and fee disclosure; and
• Individual trust rankings for the major service providers.

The Plan Sponsor Trust & Confidence Study, fielded in March 2015, polled 1,226 plan sponsors ranging in size from under $5 million to over $250 million in plan assets (average $61 million). All major industry groups are represented in the sample.  Developed by NARPP, Boston Research Technologies and Professors from Stanford University, the study is in its second year. Its goal is to set a standard for evaluating retirement plan service providers by measuring trust, and the characteristics that build or erode trust.

For more information or to get a copy of NARPP’s report, email the organization at Contact@NARPP.org