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 Industry
Insight from Fred Barstein
How Do Sponsors Rate their Advisors?
BELIEVING THAT YOU can be judged by the company you
keep, 401kExchange reviewed the results of plan advisors’
ratings from the almost 30,000 surveys completed with plan
sponsors under $10 million and the almost 3,000 surveys with
plans $10-$100 million completed in 2007 sorted by the
sponsor’s record keeper. Overall findings, as expected, are
that smaller plan sponsors are 3.3 times more likely to
change advisors than record keepers and more than twice as
likely in the larger market. Overall, of the providers with
significant sample that focus on advisors, MassMutual
sponsors rated their advisors best in the large market, and
M&I Bank gained top honors in the smaller market.
Not surprising, larger sponsors rated
their advisor higher than smaller plans and smaller plans
rated their provider almost 10% higher than their advisor.
Overall, 59.3% of smaller plan sponsors gave their advisor a
top rating (4 or 5) compared to 66.1% of larger plan
advisors; this compares to a 64.7% rating of small market
providers by sponsors and 67.6% of larger plan providers.
In the under $10 million market, 71% of the advisors have
visited their client in the last six months with almost 40%
visiting quarterly; 57% of the larger plans see their
advisor quarterly and 82% were visited within the last six
months. 6.4% of smaller plans said that they have never seen
their advisor while only 2.1% of the larger plans are paying
for nothing. Sponsors rated their providers better on
employee education than their advisors by about 30% and by
38% when it came to customer service. Smaller plans were
more critical of their advisors’ educational service by more
than 50% as compared to larger plans; that margin was 70%
when it came to advisors’ customer service ratings.
While providers might protest that
advisors rated poorly are not their responsibility, it
certainly is their problem. Plans with bad or inexperienced
advisors cost more to acquire and service and are more
likely to switch vendors. While taking any action to nudge
out a bad advisor is difficult for a provider, not taking
any action could prove costly. Providers that ignore the
necessity of rooting out blind squirrels from complicated
retirement plans that carry extreme liability for all
fiduciaries and are “enjoying” high visibility with the
press, Congress, the DoL and the courts will pay the price.
Even broker dealers would be supportive if action is taken
in an organized manner with plans moving to advisors within
their system. Only when providers start losing a significant
percentage of plans because of the poor quality of their
advisor base to savvy advisors and competitors will most
providers take action. Until then, expect to hear more
complaining from providers about organizations and advisors
preying on their plans with weak advisors, and explanations
as to why they cannot do anything about the problem.
To view the complete results by record
keeper providers, please call Jay Bloom at 561.228. 5425 or
email him at
jbloom@401kExchange.com.
Advisors please call your Account Executive at 877.777.401k
or email us at
advisorsupport@401kExchange.com.
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