Sponsors of 401(k) plans are less satisfied by the efforts of service providers, making those plan decision-makers less loyal to incumbents and less likely to promote their services.
Chatham Partners, a Waltham, Massachusetts-based research analyst for the financial services and retirement plan industry, surveys 11,000 plan sponsors annually and gauges their satisfaction with service providers based on a proprietary algorithm.
This year, 57 percent of those sponsors say they are loyal to their service provider, a decrease of 6 percent from last year.
And 15 percent qualified their relationship with service providers as “at risk,” up from 13 percent last year.
That decline in loyalty translates to whether or not sponsors would be willing to endorse their service provider. Chatham’s data shows that 60 percent of sponsors could be considered as “promoters” of their relationship with service providers, a number that has also declined 6 percent from last year.
But 12 percent would qualify as “detractors,” up from 9 percent last year. That means of the 11,000 sponsors surveyed by Chatham, more than 1,300 not only question their service provider's value, but are willing to articulate it if asked.
Satisfaction levels dropped across 10 specific areas of service providers’ responsibilities. Less than three-quarters (73 percent) of sponsors say they get “high quality service.”
That may not seem like a bad result, but considering it is a 12 percent drop from just last year, the data reflects what could be a higher level of scrutiny placed on service providers’ efforts.
Also, only 68 percent of sponsors said their service provider “reduces their administrative burden,” down 11 percent from last year.
Fewer sponsors said their service providers actually offer solutions to meet plan objectives and goals, and slightly fewer (77 percent) said service providers help with fulfilling fiduciary obligations.
Pete Starr, Chatham’s CEO, said the overall decline in sponsor loyalty suggests intensified expectations, as sponsors face more financial and regulatory pressures and are increasingly reliant on service providers.
“It has become evident that the increasing pressures being placed on meeting plan goals is changing the conversation on how providers are evaluated, said Starr in a company release.
“Providers are being asked to provide more value enabled by increasingly sophisticated technology at lower margins,” he added.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
