Client Retention Today

Retaining plan sponsor clients requires understanding what those sponsors want. Current events, such as legislative and regulatory changes, influence demand for information and services. Other expectations are more durable, such as timely delivery of communications and services.

PLANADVISER asked several advisory firms serving a range of defined contribution markets for their leaders’ thoughts on the services sponsors want today, what they have always wanted, and how advisers can improve retention by delivering what sponsors need in 2024’s market.

Navigating SECURE 2.0

Several advisers cited sponsors’ requests for assistance with the SECURE 2.0 Act of 2022’s optional provisions as a primary concern.

Mark Olsen, managing director of consultancy PlanPILOT in Chicago, says sponsors are grappling with the optional provisions that give participants more access to their account balances. He says sponsors understand the rationale behind the options but want to avoid turning their plans into ATMs.

“We’ve got good participation, we’ve got good deferral rates,” says Olsen of sponsors’ mentality. “If we offer too many of these optional provisions that allow employees to get access to their dollars sooner, is that going to trip them up later in life when they were counting on those retirement dollars?”

PlanPILOT works almost exclusively with 403(b) plans. Olsen says another pending SECURE 2.0 provision allowing those plans to invest in collective investment trusts is not garnering much attention, at least from sponsors’ human resource departments. Business and finance department heads at larger plans are interested in considering CITs for their plan lineups, but there are still potential hurdles to adoption, Olsen explains. For instance, smaller plans might need more assets to meet CIT investment minimums.

Mobile Workforces

The COVID-19 pandemic spurred the adoption of remote work arrangements for many clients. Sponsors with significant remote workforces are concerned with delivering plan-related education and service to those participants, says Eric Dyson, executive director of 90 North Consulting LLC in Dallas.

Dyson cites the example of a high-touch adviser team that hosts numerous on-site sessions and in-person meetings for participants. What happens when remote and mobile workers cannot attend these live sessions at the company’s offices?

Dyson says advisers’ first response is to seek ways to get those employees to meetings, but there are better approaches. For example, advisers might work with third parties, such as the plan’s recordkeeper, to accommodate those employees if the recordkeeper has a better solution or a different delivery method.

“We need a better solution, something that’s more mobile, whether it’s video or something from the recordkeeper,” he says. “The right answer in many cases may turn out to be: How do we give a similar message to these people who are mobile? What is the best way to deliver that message, given that it’s unlikely we’ll be able to get them to come in for these live 401(k) meetings?“

Advice to Participants

Plan sponsors’ interest in providing education and advice continues to grow, Olsen says. Sponsors recognize the importance of plan participants’ household wealth and are concerned with providing appropriate financial education.

Olsen notes that concern raises additional questions: “Who should deliver that advice? Should that be the recordkeeper? Should that be the investment consultant? Should that be a third-party financial firm? I think that’s been an active conversation for some time, but it has certainly picked up in recent years as a dialogue with committees.”

Managed Accounts

Greg Ungerman, senior vice president and defined contribution practice leader with Callan in San Francisco, says the most significant area of growth related to his department’s work with sponsors is looking at managed account providers and understanding the value they bring for participants.

“I think that’s an area where we’re spending a lot of time, because it is a technology-heavy solution that’s very customized at a participant level, as opposed to a broad plan level,” Ungerman says.

Managed account offerings are becoming more available from many providers, with payroll provider ADP Inc.—focused on the smaller employer market for retirement plans—in August adding an option through a partnership with Morningstar Inc..

Adviser-Plan Relationships

Practical aspects of the adviser-client relationship have been changing, too, says Jamie Worrell, a managing director with Strategic Retirement Partners in Providence, Rhode Island.

He has found that plan committee members are more pressed for time than they used to be. Consequently, they want shorter, more focused meetings and appreciate concise information delivery through bullet points, summaries and action items.

Worrell adds that plan committees are also experiencing more turnover, requiring training for new members on fiduciary issues.

What’s the Same?

Other aspects of the adviser-sponsor relationship remain constant. Ungerman notes the “blocking and tackling” of understanding different investment funds and their performance, organizations and portfolio management teams have not changed.

The adviser’s role in educating sponsors is another constant, he says.

“What I’ve found is if you continue to build content that’s actionable, it’s easy (for sponsors) to recognize,” says Ungerman.

When properly designed, that content takes very complex subjects, making them reasonably simple for plan sponsors to digest and make decisions. Advisers who do that will have a leg up on their competition, he says.

Timely communication and service also remain essential, says Olsen. Advisers must maintain client accountability and consistently deliver their service model. Olsen says his firm’s success comes down to the core competency of his staff.

“We’ve got a good ratio in terms of consultant per client, so people aren’t stretched thin, and we can get back to clients on a timely basis,” he says. “We can meet with clients quickly after quarter-end. We can produce robust reporting and have it individualized as well.”

Win Some, Lose Some

Given the competitive market for plan advisory services, adding new clients and losing existing clients is part of the business. However, that turnover can provide valuable lessons, and sources anonymously shared two informative cases.

In the first instance, the adviser gained a new client because the former adviser neglected the account. The previous adviser had told the sponsor they were an important client and the adviser would meet with them within 45 days of each quarter’s end to provide plan updates. The adviser delivered on that agreement only one time in two years, prompting the sponsor to seek a new adviser.

In the loss column, a plan’s committee roster changed, and the new committee asked its advisory firm, with which it had worked for several years, to modify its plan lineup to include environmental, social and governance-focused funds almost exclusively. The adviser did not believe an ESG-dominant approach was appropriate and declined the request; the sponsor chose to work with another adviser. The adviser says the relationship had become a mismatch, and it was time to end the arrangement.