Perspective: Understand Your Clients to Improve Your Bottom Line

It seems that nearly everyone today is feeling the pinch of the current economy.

That’s particularly true for plan advisers, who are seeing reduced profits due to increased industry competition, stiffening pricing pressure, and a drawdown of assets as baby boomers retire and more workers lose their jobs and roll over their 401(k) accounts. At first glance, the outlook may look bleak, but there are ways to create a competitive advantage and increase business in this market.

Client Satisfaction Drives Business

The old adage “a bird in the hand is worth two in the bush” is certainly applicable when it comes to clients. Given the cost of marketing and bringing in new business, it makes economic sense to make every effort to keep customers already on board. One study1 – based on two surveys of 395 plan sponsors and 415 advisers – revealed that only 53% of sponsors fell into the categories of “satisfied” or “very satisfied.” The rest were at risk for changing providers, with the most common reasons listed as:

  • Adviser retiring or leaving the business (20%)
  • Servicing issues (20%)
  • Lack of support (19%)
  • Insufficient knowledge to handle growing plans (17%).

Only 15% were swayed by lower fees, better provider offerings, or superior investments.

The survey concluded that plan advisers can likely increase annual sales by 10% if they raise satisfaction levels to satisfied and by 20% for very satisfied ratings. In addition to longer plan tenure, satisfied clients often mean more opportunities to generate additional revenue through referrals and cross-selling.

Differentiating Services

The plan sponsors surveyed said employee education and investment knowledge, at 22% and 24%, respectively, were among the most important services their advisers provided. Many (22%) also listed retirement knowledge – including the assurance that plans perform efficiently – as well as objectivity (20%), support (11%), and other (1%).

The survey also found sponsors were not uniformly happy with service they received in the areas categorized as high importance. Plan sponsors were most satisfied with investment monitoring, daily support, and group enrollment meetings, and least satisfied with services they felt were lacking. These weaknesses, which included employee communications, group investment meetings, proactive contact, and industry updates, can contribute to a plan performance gap.

The study recommends adding features such as auto enrollment, auto increases, and employee communication campaigns. Because these drive employee participation, encourage healthy deferral rates, and help participants diversify their investments, they’re vitally important to plan performance. They can also help advisers differentiate their practices.

Plan Performance is Key

Plan sponsors indicated that they were more concerned with plan performance than with investment performance. Plan performance declines when terminated employees remain in the plan. This increases the plan fees, administration costs, and now, especially in light of the recent LaRue lawsuit2, real fiduciary risks. Low satisfaction areas listed above can provide in-roads to improve plan effectiveness. Plan advisers should consider offering:

  • Ongoing employee education and communication services
  • Regular sponsor consultations and measurement of plan performance metrics to ensure objectives are met. These should include participation, contributions, loans, withdrawals, asset allocation, and percentage of terminated vs. active employees, as well as the cost burden of terminated employees and its impact on average account size.
  • Plan features that improve performance. For example, regular programs that remove terminated employees from the plan by providing education on retirement options, access to a broad range of solutions and assistance in rolling into IRAs of their choice. This has the effect of reducing administrative work, fiduciary risk and increasing the average account size, reducing plan related expenses.

In short, it’s all about relationships – in particular, nurturing clients, meeting their needs, and helping them to run more efficient plans. Proactive communication, plan performance solutions, and sponsor/employee education are terrific starting places.

Previous articles in this series are:

Spencer Williams is President and CEO of RolloverSystems, an independent provider of rollover services. Spencer joined RolloverSystems in 2007. Over his career, Spencer’s experience spans starting, building and leading businesses in the financial services industry. Prior to joining RolloverSystems, Spencer served in numerous roles with MassMutual from 1997 to 2007, including founder and CEO of Persumma Financial, LLC (a MassMutual Financial Group company) and as a leader in creating and building the company’s retirement income and rollover IRA lines of business.

© 2008 RolloverSystems, Inc. This article is protected by copyright law. Any redistribution or commercial use in whole or in part is strictly prohibited without the express written consent of RolloverSystems, Inc. The information provided herein is for educational and informational purposes only and should not be construed with investment advice.


1. “Growing a 401(k) Practice from the Inside Out,’ Fidelity Investments Institutional Services Company, Inc., March, 2008

2. “Supreme Court Allows Individual ERISA Suits in Landmark Ruling