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What Drives Provider Selection?

Which factors most influence plan sponsors when they choose a plan provider? At the top of the list: trustworthiness and customer service, according to a new survey conducted by the National Association of Retirement Plan Participants (NARPP). Next are technology, education, administrative service and pricing, according to a Planadviser article

Laurie Rowley, NARPP’s co-Founder and president, told ASPPA Connect that her organization launched the study in the wake of another they conducted concerning participant trust, confidence and financial literacy. “That study focused on the key drivers for savings rates among participants, and also measured trust and the impact of trust on participant behavior; the results were shocking. Trust in providers is generally quite low, this is important, because trust in the provider has consequences in terms of participant behavior. Trust essentially determines the extent to which a participant will engage with their service provider as a partner in saving for retirement,” she said.    

And trust remains a key concern, NARPP found in its recent study. Rowley indicated that in a way, that is not a surprise, saying, “Intuitively, we all know that trust is an important factor in business relationships.” But she considers this result significant for the industry: “The fact that it is the most important factor to sponsors is an absolute game-changer in the industry. Interestingly, we found that there is a huge disparity between the low level of trust among providers in general, and the higher level of trust with the sponsor’s current provider. There seems to be a pall over the industry regarding trust in providers in general.”

David F. Rosengarten of Levy Wealth Management Group, LLC, who listens to service providers’ presentations, provides the following checklist of factors that plan sponsors use when selecting a plan provider. 

Advisor Service
  • Is there advisor access to PowerPoint or a sponsor’s website?
  • Is there advisor access participant education support?
  • Is there advisor access transition Support (retired/terminated)?

TPA Service
  • Can you use a TPA?
  • Is there advisor access TPA access to complete PowerPoint tranx?

Trustee Materials
  • Is there advisor access fund check? 
  • Is there advisor access to an annual or quarterly contract review?

Recordkeeping Services
  • Is there a dedicated account manager?
  • Is there required recordkeeping revenue?
  • Does a service team cover the client, advisors and TPA?
  • Is there delivery of plan communications?
  • Does it complete the Form 5500?
  • Are there trust services?
  • Who does the recordkeeping?

Enrollment
  • Is there automatic eligibility tracking?
  • Are kits available free of charge?
  • Can one enroll by phone?
  • Can one enroll on the web?
  • What is the sponsor's responsibility in enrollment?

Participant Inquiries
  • What are the allocation/fund change options?
  • What is the loan initiation process?
  • Is there a loan fee?
  • Is there loan default monitoring?
  • Is there a fee for in-service withdrawals, hardships, RMDs, terms?
  • Is there a process to roll over from a previous service provider?
  • What is the distribution/loans/rollover process?
  • Is there online benefits maintenance?
  • Does the contribution rate change?
  • Is there a contribution rate escalator?
  • Is there auto enrollment?
  • Is there auto increase?

Statements
  • What is the quality of the statements?
  • Are statements online only?
  • Is paper available for free?

Participant Website
  • What is the quality of the website?
  • Is a personal rate of return available?

Support Structure
  • Are there salesmen?
  • Is there sales support?
  • Is there internal sales support?

Investments
  • Is there open architecture?
  • Do investments involve proprietary funds only?
  • What about availability of funds?
  • Is there a limit on the number of funds?
  • How many fund families offered?
  • What is the maximum of funds allowed on the menu?
  • Is mapping required?
  • Is there a mapping benefit?
  • Does the provider use net asset value or unitized funds as a standard?
  • Does the provider offer a proprietary fixed account/stable value fund?
  • Does the provider offer other fixed/stable value funds?
  • Does the provider offer collectives?

Rowley says that the message for plan sponsors is that their experience will improve when providers know they are being measured. As for providers, she says, “Knowing what service dimensions drive trust, and that trust is critical to their clients, the data from this study will help them focus their efforts to build loyal relationships.” And overall, Rowley says, “Going forward we see that trust and the factors that drive trust will be differentiators in the DC space.”

John Iekel is Senior Writer and Editor for the ASPPA Net and NTSA Net portals.