feature | PLANADVISER July/August 2017

Reviewing Providers

Non-cookie-cutter plans require non-cookie-cutter services

By Rebecca Moore | July/August 2017
Page 1 of 6
Art by Jing Wei

Retirement plan advisers can add value for their clients by reviewing plan providers regularly. Through this practice, they can make sure a provider meets all the needs of the plan and its participants, plus maybe find an opportunity to negotiate plan fees. In the process, they may learn things that help their own business model, as well.

Kathleen Kelly, managing partner at Compass Financial Partners, in Greensboro, North Carolina, says her firm takes a disciplined approach to provider reviews.

“We do an annual fee benchmark for all clients. It validates that fees are in line, reasonable and commensurate with services provided,” she says. However, fees are only half the conversation, so Kelly also looks at how well the plan design and provider suit the plan’s demographics. Plans have changing demographics, she points out. “We look at doing a request for information [RFI] or request for proposals [RFP] even if things seem fine,” she says. “It helps plan sponsors understand what is available in the market—services and deliverables that have changed over time.”

Compass recommends a formal review of recordkeepers every three to five years. “Obviously, if there are issues or challenges with services or fees, we look at the market sooner,” she says. Corporate changes such as a merger or acquisition may also drive a more frequent review.

Kelly says her firm works with close to 20 providers. However, most of its clients are concentrated among half of those. “While we remain agnostic and don’t change new clients’ recordkeepers for the sake of placing them where we have a larger relationship, the bell curve of our clients’ recordkeeping relationships is similar to [that] of the market in general,” she says.

She adds that having clients with different recordkeeping partners provides leverage for negotiations, along with improving her firm’s understanding of available capabilities and resources. Compass can then better advocate on clients’ behalf, as well as better identify the “best-fit” partner during a recordkeeper search. “We regularly parlay experiences with one vendor to [help us problem-solve with] another—a recent example is a large recordkeeper that had moved away from paper enrollments. We had on-site education planned for a client’s manufacturing facilities where web usage is very low. Due to success we had with other clients, we were able to persuade this recordkeeper to come prepared with quick-enroll cards that required only a participant signature to enroll in the plan, and it was a tremendous success!” she says.

Kelly thinks a separate review of investment managers is necessary. If investments are poorly performing, advisers can help retool the plan’s lineup so plan sponsors have one that is defendable. She suggests that, when searching for a recordkeeper, plan sponsors should have the investment lineup finalized. That way, when they go to market, they can evaluate whether a recordkeeper can accommodate those investments and price accordingly.

This also ensures that the choice of a recordkeeper’s proprietary investment product does not skew fees, she adds.