Practice Management

Why Employers Dump Their Financial Advisors

By Tom Foster

What’s the top reason why employers divorce their financial advisors who support retirement savings plans? In a nutshell, it’s poor service.

Four in 10 employers said they have switched financial advisors at some point, according to research conducted by MassMutual in 20151. While some employers complained about a lack of knowledge on their advisor’s part or high fees, most of the reasons related to disappointments over service.

One-third of survey respondents (34 percent) said they had a negative impression of their advisor1. We’re not talking about a negative “first impression.”  Rather, it was an impression formed after months and even years of getting to know each other. Think “War of the Roses” with Michael Douglas and Katherine Turner.

So what contributed to all the negativity?  Employers complained about a lack of involvement with their retirement plan, passivity, not enough communication or too little interaction with employees.  Meanwhile, 14 percent simply panned their advisor’s overall service and another 7 percent cited the advisor being difficult or unreliable.

It’s unforgivable.  The retirement plans market is first and foremost a service-oriented business and advisors who support it can ensure they are living up to expectations by taking specific actions:

  • Take time to understand the level of service being provided to your clients when you recommend a recordkeeper or third party administrator. Proper vetting today will help you keep the business tomorrow.

  • Define poor service. This can mean that the employer hasn’t heard from you since the last lunar eclipse. Or perhaps your TPA has trouble meeting deadlines. Has the recordkeeper failed to mail statements on time? It’s your job as the plan’s advisor to iron out these issues.

  • Educate employees. If employees aren’t sufficiently educated about their retirement plan, they can’t make informed decisions. This lack of education can leave the employer feeling left out in the cold and vulnerable to fiduciary lawsuits. Hell hath no fury like a plan sponsor scorned.

  • Take the employer’s pulse regularly. The advisor must have the company’s pulse on its retirement plan consistently provide a high level of service. After the sale, the advisor and the recordkeeper’s enrollment specialists need to help with the initial enrollment meeting. They also need to hold periodic reviews with the employer’s day-to-day administrator to meet targeted participation rates, attend annual meetings with participants, and help educate both employees about allocation options and their employer in meeting its fiduciary responsibilities.

Providing service offers both a challenge and an opportunity. Your challenge: deliver a high level of service to retain your clients and win more business. Your opportunity: when other financial providers don’t service their clients well, employers looking for a change will welcome your solutions and high-level service.

If you remember that service is king, your relationship with employers that sponsor retirement plans can be not only long but fruitful. Your assets under management will rise from both the plan and the new relationships you build with the business owner and employees, all of whom are likely to need your help to retire on their own terms.

 

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E. Thomas Foster Jr. is Assistant Vice President, Strategy and Relationships, for Massachusetts Mutual Life Insurance Company (MassMutual).

 

Research sponsored by MassMutual and conducted by Greenwald & Associates in 2015.

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