The annual Provider Loyalty Index from Chatham Partners measures the loyalty of retirement service providers’ clients, placing sponsors on a scale from “loyal” to “favorable” to “at-risk.”
Fewer plan sponsors rated their providers’ services highly this year. On a 7-point scale, the percentage of respondents who ranked their provider as a 7 or 6 for “provid[ing] high quality service” fell from 85% to 73%. Just two-thirds reported that their provider “reduces administrative burden” (68%) and “offers solutions to plan objectives and goals” (67%); both of these figures are down from more than three-quarters in 2014.
In 2014, 61% of sponsors with decisionmaking authority over their plans were classified as “loyal,” according to Chatham Partners’ calculations. This year, that number has fallen to 57%. The “favorable” and “at-risk” groups each gained 2 percentage points, going from 26% to 28% and 13% to 15%, respectively.
“As providing superior client service is becoming the norm rather than a point of differentiation for providers, it is important that retirement plan providers also succeed in providing value added services that assist plan sponsors in meeting retirement plan goals,” said Chatham Partners CEO Peter Starr.
Last year, two-thirds (66%) of plan sponsor clients were classified as promoters of their providers’ services, 26% were passive, and 9% were listed as detractors. The number of detractors has increased to 12% this year, and at 28%, more sponsors are neutral on their providers as well. Just six in 10 sponsors (60%) can now be counted on as promoters, which could signal impending requests for proposals (RFPs) for many firms.
“It has become evident that the increasing pressures being placed on meeting plan goals is changing the conversation on how providers are evaluated,” Starr added. “Providers are being asked to provide more value by increasingly sophisticated technology at lower margins.”
In its review of more than 11,000 plan sponsors, Chatham Partners asked them to rate the degree to which their provider: “helps fulfill fiduciary responsibilities”; “is committed to technology”; “treats [them] as an important client”; “offers a full range of services”; “flexible meeting [their] unique needs”; “provides good value for the money” and whether they “would recommend [their provider] to others.” Plan providers looking to gain a competitive edge may want to develop their practice in these areas to boost their sponsors’ ratings.