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Competing on Advisor Services in the Small Retirement Plan Market

By Rubesh Jacobs

Companies such as Bank of America Merrill Lynch, ING, Mass Mutual, ADP, American Funds, and John Hancock, are fierce competitors in the small (less than $5 million in assets) and medium (less that $20 million in assets) retirement plan space.* (Lemann, M.)

Some of these firms (e.g., Bank of America Merrill Lynch, ING, and Mass Mutual) are also significant players in the large (greater than $20 million in assets) market. In the larger plan space, as a result of the scale, where they compete on the level of their services to woo top retirement advisors, top advisors receive customized, high-touch attention.

Most of the very same top advisors also serve clients in the small and medium plan space as well. As a result, firms focused on the smaller plan market are compelled to compete on the quality of their services in order to woo business from top advisors.

So, the question is: how can firms focusing on the smaller plan segment cost-effectively compete with larger firms, providing higher levels of services to advisors?

Our research and experience in the small retirement plan space suggests the following steps:

• Segment advisors: Top advisors deserve the best services the company can offer. Not-so-top advisors deserve not-so-top services. So, analyze your book of business to understand who your top and bottom performing advisors are. Once established, create the platinum, gold, and silver service packages. Use these packages as a recruiting tool as well as a carrot that encourages higher performance.
• Provide an integrated online and offline service experience: Integrate your backend systems and processes so that from an Advisor's perspective, your services are consistent whether they call or go online. A service rep should have an intimate knowledge of the advisor and his/her plans to be able to provide customized, high-touch service. The Web site should mirror the same level of information, accuracy, and consistency.
• Use a performance dashboard: Develop a small, but insightful set of metrics that reveal performance of advisors, quality of service, and the economics. The metrics should be used judiciously with each segment of advisors to improve growing relationships, mend those with high potential, and end unproductive ones. Conversely, firms can also use the dashboard to "promote" advisors to Gold, Silver, and Platinum. Most firms are adept at measuring the quality of service using internal metrics. Operational metrics notwithstanding, the quality of service is truly determined by the recipients. So ask advisors, sponsors, and participants. Last, but not least, observe the financial performance metrics over a few quarters to account for seasonal patterns before digging deeper to capture the value from the new services platform.

Bibliography:
*Lemann, M. (2010, June 16). Ignites. Retrieved 07 22, 2010, from http://www.ignites.com/c/114643/10983/vanguard_fidelity_bofa_brands_score_market