The Recordkeeper Relationship

Advisers and recordkeepers partner to deliver superior service to plan sponsors
L to R: Narkoff and Connelly

Advisers increasingly look at recordkeepers as partners, sitting on the same side of the table, working together to deliver a complete package of services to the plan sponsor and participants. Alison Cooke Mintzer, Editor-In-Chief of PLANADVISER, spoke with Kathleen Connelly, Executive Vice President of Client Services, and Mike Narkoff, Senior Vice President of Sales for Ascensus, about this dynamic trend in adviser-recordkeeper relationships.

PA: What trends are you seeing in adviser fee structures?

Narkoff: The most noticeable trend is the shift to the “fee-for-service” model.

If you ask retirement focused advisers about their existing clients, you’d find the fee-based structure is the minority. However, if you ask how they envision their practices working going forward, almost always the response is 100% of new sales will be in a fee-for-service model. The byproduct of that is the migration towards institutionally-priced investments.

PA: From your perspective, what support services are advisers most likely to ask the recordkeeper to deliver?

Connelly: Retirement centric advisers see their value proposition as being about the outcome for the participants. So traditionally advisers seek services that are participant focused.

Two categories come up: One is plan design and optimization, helping the adviser identify opportunities to improve the outcome overall. The second piece is helping advisers become more efficient, putting together presentations that are ready to be delivered to the investment committee or the client.

PA: Historically, most advisers worked with a number of recordkeepers across their entire client spectrum. What value does this have for advisers and their plan sponsor clients?

Connelly: Advisers are able to benchmark and to identify new tools and best practices that different recordkeepers bring to the market. They’re also able to tailor solutions to fit the needs of their plan sponsor clients. Sponsors are looking for platforms that are open architecture, that have transparency and, most importantly, that see the adviser as the primary client. At Ascensus, we’ve found that when you have product solutions that run the gamut, advisers begin to migrate their entire books to us, which puts us in a position where we can provide even more value. We can customize and brand and build work flows around their book of business.

We launched a new department within the client services organization, Strategic Partners. The team is exclusively focused on retirement centric advisers who want this business to be, if not all they do, 50%, 60%, 70% of their practices.

PA: How involved are advisers in the selection of a plan recordkeeper?

Narkoff: We think employers rely heavily on the expertise of their adviser and will continue to do so, but there’s a different perspective today. The fee-for-service model is associated with the adviser signing on as the 3(21) fiduciary. It is critical that the recordkeeping platform support the adviser and plan sponsor’s role as fiduciaries in the due diligence process and implementation of the investment policy.

We’ve seen an adviser ask multiple providers to quote on an opportunity using the same menu across all platforms as an example. There is a part of it that comes back to the degree an advisory practice can minimize all the moving parts, and become more efficient as a practitioner. 

PA: What are you seeing as trends in plan design?

Connelly: A significant portion of our client base has adopted QDIA, the adviser community has seen the benefit, and we have encouraged auto-enrollment and auto-increase where it makes it sense. Once a client comes on board, inertia settles in, and you need to deliver a compelling reason to make a change. In the smaller end of the market, you have to solve a specific problem, unlike in the larger end of the market where the auto trends are much higher.

One trend we are encouraged by is that advisers and employers are much more comfortable enrolling participants at 6% to 7%, rather than the historical 2% to 3% rate. Ironically, the stick rate is the same. It’s unchanged, whether at 2% or 6%.

Narkoff: That’s an area where the industry as a whole has done a good job of leveraging behavioral finance. There are great studies available on how that default rate isn’t going to have a material impact on the stick rate.

For that very reason, in today’s environment the old litmus test of participation rate may not mean the plan is on track to be successful. There’s a false sense of accomplishment that you have a high participation rate, yet everyone is in at 2%. You could argue whether or not we’ve done the employer and employees a service or a disservice.  

In working with advisers across the industry, we developed some best practices which can be found at