Fees are important to plan sponsors shopping for advisers, but they aren't necessarily a deal breaker.
In fact, in a study of sponsors by Chatham Partners and Franklin Templeton Investments, pricing came in fourth when employers were asked to cite the reasons why they select a particular financial adviser. The top three: participant services, fiduciary services/compliance, and personal fit and sales process.
Prospects decide whether they will reject an adviser during the sales process, said Yaqub Ahmed, senior vice president and head of the investment-only division (U.S.) at Franklin Templeton.
Typically, it comes down to whether an adviser has a detailed understanding of the potential client and the plan's needs.
“Some intermediaries fall into the trap of pitching a box and having a standard response and sales process,” Mr. Ahmed said. “If you come in with a needs-based approach and couple that with a careful interpretation of the request for proposal, you can craft a response that meets the plan's specific objectives.”
Sponsors visited by ill-prepared advisers thought that the latter didn't comprehend the issues for the plan's demographics, Mr. Ahmed said.
Fiduciary and compliance services ranked as the second-most-important factor.
“Good advisers will explain those nuances — the limited scope versus the full scope,” Mr. Ahmed said.
How advisers get their foot in the door depends largely on their referral network, according to the study.
More than 80% of the plan sponsors said that they choose advisers based on recommendations and referrals from a colleague or retirement plan service provider.
Direct solicitations from advisers are less likely to go anywhere, as just 23% of plan sponsors said that this is how they select candidates.
Apparently, it helps for advisers to get some peer notoriety.
“Some practice leaders are the ones who are getting a little bit of PR on what they're doing, and being acknowledged for it,” Mr. Ahmed said. “That goes a long way.”
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