Making Friends

The path to business success in the retirement plan adviser world is paved with good relationships. A recent Fidelity Investments report asserts that advisers with 401(k) plan clients who make it a point to develop and maintain strong relationships can grow their 401(k) practices—and their revenue—by an estimated 40% over 10 years, compared with those who do not.

Plan sponsors are more focused on the level of their adviser’s support and knowledge, rather than highlighting fees as a cause for breaking an existing relationship, explains the report.

According to Fidelity, sponsors that are very satisfied with their advisers expect their relationships to last more than 11 years, which is more than three years longer than those that are just satisfied.

“Advisers rate competition from other advisers as the greatest challenge to their 401(k) practices’ profitability,” says Tom Corra, Senior Vice President of Retirement Product & Services for Fidelity Investments Institutional Services Company. “In such a competitive market, advisers’ relationships with plan sponsor clients are more important than ever. We believe that advisers who can strike a better balance between servicing their plan sponsor clients and prospecting for new business, and can build a more efficient model for delivering what plan sponsors want, will be better positioned to drive profitable growth.”

Fidelity’s research reveals that there is a strong correlation between satisfaction with the adviser and satisfaction with the plan’s performance. When working with plan sponsors, advisers should focus on plan features and education that can improve the key drivers of participant retirement readiness: employee participation, healthy deferral rates, and appropriate asset allocation.

Plan sponsors cite several areas where they are less than satisfied with their adviser’s help, including advisers not being proactive with respect to communications and providing them with industry updates. To help address plan sponsors’ needs in these areas, advisers should consider developing a proactive communications strategy to help develop 401(k) and retirement knowledge with plan sponsors, as well as to help them understand their fiduciary duties.

Advisers who deliver plan sponsor satisfaction efficiently will have an advantage in the competitive marketplace. According to Fidelity, advisers can gain efficiency by defining and communicating their value proposition, developing a referral and reference database, leveraging plan providers’ efficiencies, and adding retirement income planning services.

Advisers can get a copy of the full report at advisor.fidelity.com.

*Illustration by Christopher Silas Neal