Defined contribution investment-only firms have a ways to go in trying to win the loyalty of plan advisory firms.
Despite what it terms "significant investment of resources" in value-added programs, a study by Chatham Partners reveals that the DC industry only hits 73.5 on a scale of 100 in terms of loyalty.
The study sought a way to quantify advisor and broker/dealer loyalty, and created a proprietary index for each that measures the effectiveness of value-added programs in creating awareness, differentiating and driving incremental sales. While some firms did very well, standing out as leaders among their peers, the study found that the industry as a whole has room to improve.
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According to the research, value-added programs have to stand out from the competition and not simply mimic what's already out there. The study identified four major factors that emerged about firms that are highly successful.
1. Being the preferred provider for DC advisors strongly correlated with strong value-added programs.
2. Programs that are targeted toward the type of advisor, channel, or target market segment have the potential for greater appeal to individual market segments; a broad-brush approach is less successful.
3. Value-added programs can provide the proverbial foot in the door to a firm, or serve as the incentive that convinces advisors and broker/dealers to switch providers.
4. Top-rated firms have adopted best practices around both the creation and the management of value-added programs for both DC advisors and their broker/dealer and advisory firm home offices.
Not only has the research indicated that value-added programs are an effective way to catch the notice of DC advisors, when such programs are well done they can highlight a firm's capabilities.
In addition, something that the study said was the most important factor, "DC advisors, themselves, largely believe that the firms that invest in the growth of their businesses are worthy of being rewarded in return with new business."
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