Wells Fargo has published a new analysis for the retirement plan advisory community, dubbed “The Science of Superior Service,” which offers insight on the “gap between what plan sponsors want and what advisers think they want.”
Talking through the research with PLANADVISER, Ron Cohen, head of defined contribution investment only (DCIO) sales at Wells Fargo, said that at a high level, the analysis clearly shows client satisfaction hinges on careful control of expectations and actions. Not really a surprise, the bigger the average plan size in a practice, the bigger the revenue growth. At the same time, as average plan size increases, Wells Fargo finds the perception of what advisers believe is important to the sponsor evolves.
For example, among small plans there is less of an emphasis among advisers on “helping the client manage overall costs.” The same is true of “recommending plan efficiencies” and “acting as a 3(21) fiduciary,” which seem to be much more of a priority when advisers think about serving their larger plan clients. Interestingly, the advisers surveyed by Wells Fargo seem to think smaller plan clients are more concerned with the adviser “meeting one-on-one with employees” and “discussing individual retirement account (IRA) rollovers.”
Cohen observed that these conceptions among advisers are only somewhat accurate and do not always reflect the broad characteristics of what small and large plans look for in the advisory relationship. He pointed to clear disconnects between what advisers think and what sponsors expect, warning that plan size is far from the only determinant of what will be important to a given plan sponsor.
“Take regulatory compliance and follow through,” Cohen said. “The majority, 70%, of advisers feel this is among the most challenging avenues through which to differentiate their quality of client service, yet it is also one of the most important factors to plan sponsors—ranked as a top differentiator. Along the same lines, the data shows 59% of advisers feel offering plan insights about participant behavior is challenging, but it also ranks among the top services that plan sponsors view as a differentiator.”
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The analysis goes on to consider “services that are difficult to provide and have a low impact on success” compared with “services that are difficult to provide but have a high impact on success.” In the former category are “understanding participant behavior” and “providing easily understood explanations of retirement topics,” while the latter category includes “keeping up with industry product development,” “ensuring regulatory compliance” and “discussing fees charged and value provided.”
Cohen pointed to “proactive recommendations” and “responsiveness and thoroughness” as essential adviser characteristics, whatever market segment is being served. Of course, there is no simple formula for “being proactive or responsive,” and there is actually evidence in the data that some advisers actually overvalue their responsiveness and undervalue their communication skills and the true level of their engagement with plan sponsor clients.
“When we dug deeper and analyzed the data, we saw that responsiveness to the plan sponsor is simply the table stakes. We saw that the No. 1 differentiator, according to plan sponsors, is simply showing serious and consistent engagement with the plan, yet a third of advisers find this to be challenging,” Cohen explained. “Understanding participant behavior is also important.”
Indeed, while “understanding participant behavior” ranks lower among services advisers believe to be important, the topic ties in closely to “educating participants,” “defining plan health” and “engagement”—all of which rank very high with sponsors.
“Advisers who rated the importance of understanding participants a 4 or 5 (out of 5) are twice as likely to report revenue growth of 25% or more in the past three years,” Cohen concluded.
Additional research findings and other information is available here.