Retirement plan sponsors' top criteria for choosing an adviser

Trust is the most important quality vetted in the selection process, but other factors go into the decision

Nov 22, 2017 @ 3:00 pm

By Warren Cormier

Each year, millions of dollars are spent by advisers and record-keepers in their pursuit of new defined-contribution plan sponsor accounts. Churn in the DC industry is notoriously low. This is the result of relatively high overall satisfaction and loyalty with the adviser and incumbent record-keeper. Expectations that conversion processes are painful and general commoditization in the industry also contribute to the low churn.

Interestingly, providers typically consider themselves highly differentiated from the competition, but rarely are so, at the product level. Where the true differentiation occurs is at the customer-experience level. Competitors can copy your innovations but cannot easily copy your style. For this reason, communicating your unique customer experience is the path to success. In most cases, this happens in the sales process.

If, after numerous calls to plan sponsors over years (in some cases) to build some level of rapport, the adviser is invited to submit a proposal for selection, the arduous selection process begins. Importantly, advisers sometimes go into the sales process with a little information regarding what the prospect is seeking in a new adviser and record-keeper. They may also have insights into the deficiencies causing the prospect to be changing players.


However, the advisers may not know the relative weights plan sponsors place on the various selection factors and how much they are willing to trade-off excellence in one factor to obtain excellence in other factors. Rarely is one adviser and record-keeper a perfect solution. As in life, everything is a trade-off. The key is understanding where and how much plan sponsors will compromise on less-important selection factors to achieve a perfect fit on their most critical criteria.

(More: Do specialized retirement plan advisers even need a broker-dealer?

Obviously this is an extraordinarily complex process. Fortunately, though, the selection factors are fairly predictable. It is the decision weights that vary by the plan sponsor.

Based on years of win-loss research and a choice-modeling study involving 300 in-depth telephone interviews with plan sponsors, Boston Research Technologies measured the relative weights. Interestingly, these relative weights are not entirely clear even to the plan sponsor as the selection process continues. But, nonetheless, the weights exist and are measurable.

What matters most

It is important to point out that the factors driving selection are different from the factors that drive satisfaction and loyalty. This article focuses on the selection factors.

Adviser selection is driven first, and most obviously, by proof that the adviser is technically competent at what he/she does. But this is not a differentiator. The fact the sponsor is even talking to you is very often due to a referral that testifies to your competence. If that is not available, then the sponsor reverts to designations, proof of book of business, etc. But these are simply your ticket to get into the game. So what makes the biggest difference?

The biggest factor is your ability to create a sense of trustworthiness. Keeping in mind that because sponsors in most cases are not truly technically knowledgeable enough to assess your skills from a sales call (in the same way you cannot assess the skill of a surgeon who might perform your operation from a phone call), they revert to their feelings. Importantly, sponsors fear what they don't know, and have to be confident that you will keep them within the regulatory guardrails.

(More: Retirement plan advisers need to start planning for their own succession)

Trust is the most important feeling in the selection process. It may be expressed in words such as "chemistry" and "likability," but at the end of the day, sponsors are expressing trust. Do not assume you have a high degree of trustworthiness going into the sales call. Our research shows that only a quarter of sponsors feel advisers, in general, can be relied upon to do the right thing. You should have a strategy going in to establish this most important characteristic. Using jargon, having confusing pricing, speaking too swiftly, having densely packed communications materials or speaking down to your audience (lecturing), are proven ways to destroy trust. It seems obvious, but these are very common mistakes in the adviser channel.

Make it easy

Assuming you have built trust, there are important secondary factors. People like to do business with people they like. But in this case, this translates into making it easy to do business with you. Again, it may seem obvious, but this is only achieved in about half of adviser-sponsor relationships.

Right along with this is providing specific proof that you will be available to help them when they need you. Because they aren't always sure when they need you, assuring them that you are anticipating their needs is a critical dimension of this characteristic. You can add "being flexible" as another dimension of being "easy to do business with." Sponsors don't want to be talking to a "rules reciter" when they need to get something done; they want to talk to a creative problem solver who at the same time keeps them out of trouble.

Finally, being a thought leader is a powerful way to get sponsors comfortable with you. Thought leadership is very often claimed but rarely actually exists. Every sales call should include delivery of a new idea. By this I mean an idea that makes the sponsor think differently about a familiar topic and then causes them to take an action. Hopefully that action is hiring you!

Warren Cormier is the CEO of Boston Research Technologies and chief behavioral officer at the National Association of Retirement Plan Participants.


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