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How Advisors Can Give Plans Sponsors What They Want

How Advisors Can Give Plans Sponsors What They Want

June 13, 2016

What does a plan sponsor want from an advisor? It’s not as complicated as you might think.

Earlier this year, MassMutual Financial Group released a report designed to help “retirement plan advisors succeed by identifying what motivates plan sponsors to work with a plan advisor.”[1]  Armed with this information, advisors can fine-tune their value proposition to attract new clients and provide better service to existing clients—all of which can generate more referrals

The study found that plan sponsors prefer to work with plan advisors who:

  • Emphasize employee education
  • Provide good customer service
  • Work to find ways to reduce plan costs

And among those already working with an advisor, fiduciary comes in third, ahead of cost savings.

The report also found that plan sponsors with $25 million to $75 million in assets have slightly different—and broader—requirements. These clients want advisors who emphasize reduced costs but also give advice on plan design and investment selection, help with other benefits and provide fiduciary support.

Advisors should understand each of these needs, and then explain how they can help a plan sponsor achieve each one. MassMutual noted that “plan advisors agree these are the key services valued by sponsors. Yet, when asked, few advisors could succinctly articulate their value proposition or elevator pitch.” Here are some talking points to better understand these issues and how they can be used to help plan sponsors.

Employee education

Plan sponsors want an advisor who educates employees on the mechanics of a plan and the importance of contributing. They also value those who can provide personalized advice to employees—especially those nearing retirement. Frequency of education is also important to plan sponsors who are already working with an advisor.   

But this is easier said than done, according to Mark Hebner, founder and CEO of Irvine, Calif.-based Index Fund Advisors.

His firm works with approximately 50 401(k) plans and promotes a host of educational tools, including customized websites, videos, printed materials and seminars. They are “mecca for investor education,” he said—yet “after 17 years of frustration, I’ve accepted that plan participants rarely engage in these opportunities, regardless [of whether] they are online or in the workplace.”

The numbers support Hebner’s assessment. According to a study by Schwab Retirement Plan Services:[2]

  • 52 percent of plan participants say they don’t have the time, interest or knowledge to properly manage their 401(k) portfolio
  • 73 percent spend less than eight hours per year managing their 401(k) plan account
  • 56 percent do not review any of the plan-related education materials they receive

As a result, Hebner believes it’s more important than ever to provide plan sponsors with enhanced education that can help them select the best investment strategy and funds.

Ryan Byrne, QPFC, vice president of Qualified Plans at CLS Investments in Omaha, added that advisors should work with plan sponsors to schedule mandatory employee education sessions.

“It’s a partnership between the advisor and the HR staff to find the best ways to highlight the benefits of the 401(k) plan—otherwise, participants will miss out on vital information,” he said. “But HR must take ownership [of] this process.”

Byrne noted that every plan is different, so an advisor should tailor their value proposition to meet the demands of individual companies and participants.

Customer Service

MassMutual’s study reminds advisors that “good customer service is critical to both those already working with an advisor and those not working with one. Being responsive and accessible, listening and responding to needs and resolving problems are key to good service.”

Byrne added that customer service can be bolstered by partnerships with proven service providers.

“An advisor is the quarterback of all the service providers,” he said. “This means researching vendors, getting recommendations and referrals, talking to colleagues in the field, asking the opinion of their broker/dealer—whomever they can reach who can give insight. Do the service providers have the support you need to best address the plan’s needs?”

According to Hebner, selecting and monitoring service providers is a vital part of any advisor’s job. By unbundling services, they can create a better overall plan, as opposed to one that’s under one provider, with fewer checks and balances.

Hebner added that record-keepers are an important component of customer service.

“They are core to the customer service experience,” he said—and it’s absolutely necessary to find one who is well-suited to a company and its participants.

Reducing Plan Costs

Plan sponsors want advisors to “help lower the overall costs of the plan, including negotiating with providers, reducing investment fees or attracting more assets to the plan to keep costs low,” according to survey respondents.

Byrne again suggested benchmarking service providers against one another and seeking multiple bids. “Do your due diligence, research referrals and drill down on add-on fees for services,” he said.

Investment fees are a hot button issue, as more companies are being found legally culpable for excessive fees. Hebner said this is largely due to failed management.

“An advisor must do the homework on how the market works, including reasonable fees for investment funds,” he said.

He pointed to the success of such cases as Tibble v Edison, recently decided by the U.S. Supreme Court in favor of the plaintiffs and their lawyer, Jerry Schlichter, who has made a name for himself by suing companies for faulty 401(k) management and high fees.[3]

“There are a boatload of plans that are being poorly managed,” Hebner said. “For someone like Schlichter, it’s like shooting ducks in a pond. He’s going to win many more cases and make a fortune.”


As advisors navigate the waters of the Department of Labor’s new Fiduciary Rule, they must also educate plan sponsors on potential liability issues. But first, they must understand the new environment themselves, noted Hebner.

“The number one thing I see is that advisors haven’t done the homework,” he said. “They are stuck in a world of picking, monitoring and firing investment managers. If you are taking on fiduciary responsibility, you’d better do your research.”




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