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Though the 2006 Pension Protection Act has changed the way providers, sponsors, and participants can and do interact with each other, the defined contribution (DC) retirement plan market in 2007 is a mature and robust industry. Penetration of DC plans in large companies (those with 1,000 or more employees) is nearly universal. Industry consolidation is well under way as major providers build scale and others find attractive niche markets where they can compete effectively.
 In such a saturated market, the key to account retention is the building and maintenance of strong relationships with plan sponsors that can withstand occasional, temporary lapses in service quality as well as the normal turnover of decision makers at both the employer and plan provider. Essentially, this means “relationship management.”
Overall, two-thirds of respondents give their provider an “excellent” or “very good” rating per Spectrem’s Perspective Best Practices in Relationship Management for Retirement Plan Providers. But one-quarter rate their provider only “good” and 8% say “fair” or “poor”. It’s interesting to note that the same 10% shown in the chart below, decision makers who rank their provider as “fair” or “poor”, is also the percent of plan sponsors who switch their retirement plan provider in any given year. Paying more attention to this unhappy 10% of decision makers could be the difference between losing or retaining the sponsor relationship. In addition, the 22% of decision makers who rate the provider as just “good” is not a particularly positive sign for providers. This “good” group could slip easily into “fair” or “poor”.
In addition, plan providers get somewhat better evaluations from decision makers than they do from day-to-day administrators, which is positive overall. While most plan sponsors say they have a primary contact person with the provider, there does not appear to be a large volume of communication going on.
No matter how good your relationship is with plan participants or sponsors, there is always room for improvement, especially in such as mature market.
The PPA allows for more contact and guidance between plan providers and sponsors to participants, allowing for a deeper level of financial planning than ever before, but the gatekeeper is the plan sponsor. Keeping the plan sponsor happy and more satisfied may help you increase your access to participants. Sponsors want to feel a trusting relationship, and not suspect that you are ignoring them after gaining their business, or taking their business for granted.
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High Net Worth Advisor Insights Newsletter April 2008
