Plan sponsors don't choose advisers based on pricing

Dec 9, 2012 @ 12:01 am

By Darla Mercado

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.” Twitter: @darla_mercado


What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video


Top questions surrounding future of DOL fiduciary rule

Reporter Greg Iacurci and managing editor Christina Nelson discuss the biggest uncertainties springing from the Fifth Circuit Court of Appeals' decision to vacate the regulation.

Latest news & opinion

Finra looks to streamline broker-dealer exams

CEO Robert Cook says three examination teams may be consolidated.

The 401(k) robo-revolution is here

Could human advisers be displaced as digital-advice firms use technology to deliver services to plan sponsors and participants?

SEC forging ahead on fiduciary rule despite DOL rule decision in 5th Circuit

Chairman Jay Clayton says 'the sooner the better' when asked when an SEC fiduciary rule will be ready.

What the next market downturn means for small RIAs

Firms that have enjoyed AUM growth because of the runup in stocks may find it hard to adjust to declining revenues if the market suffers a major correction.

DOL fiduciary rule likely to live on despite appeals court loss

Future developments will hinge on whether the Labor Department continues the fight to remake the regulation its own way.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print