The average tenure of DC plan providers is currently 7.4 years, making the opportunity to win business from new 401(k) plans rare. There is more at stake in the final RFP process than ever before, and providers must be ready to make a lasting impression when given the chance.
This year’s Retirement Plan Advisor Trends™ study includes a dozen in-depth interviews with DC advisors with recent RFP experience to uncover why plan providers and DC investment managers didn’t ultimately win the business after making it to the final round.
For DC plan providers, beyond being disqualified for having high costs/fees, finalists were often cut from further consideration based on other key factors firms have more control over. DC advisors have shared that some finalists didn’t appear to really “want the business” or failed to create strong relationships or a sense of partnership with them by not being readily accessible during the evaluation process.
In other cases, DC advisors said cuts came down to DC plan providers not having an open architecture, not having an appealing fund lineup or not being a familiar-enough brand.
Meanwhile, when vetting new DC investment managers and funds, DC advisors were most attentive to fund category, investment performance, risk level and overall cost. Outside of being flagged as less competitive in terms of performance and cost—the most ubiquitous reason for passing on a potential firm—common pitfalls stem from concerns around the investment approach or risk management. . In fact, a number of DC advisors eliminated funds deemed overly aggressive for inclusion on a retirement plan lineup.
In addition, advisors were concerned with fund management being in flux such as portfolio manager turnover or a shift in the team investment approach.
Of course, DC advisors were also asked to elucidate on what ultimately differentiates the winning firm from the competition. Key criteria for selecting plan providers pivot upon being a trusted, proven brand that’s customer-centric, being an ideal fit within an existing fund lineup, and showcasing strong risk-management practices for DC investment managers.
Ultimately, there are many factors that drive a plan advisor to consider and choose a provider. Understanding these unique drivers of consideration, satisfaction and loyalty for plan providers and DC investment managers will help firms position themselves to win business when given a chance at bat. Our Retirement Plan Advisor Trends report gives firms an in-depth understanding of the attitudes and preferences of the most critical players in the distribution of DC plans. Click below to learn more.