While investment performance and fees often command the greatest attention, the power and influence of the human role cannot be underestimated in the defined contribution (DC) market. New insights from Cogent Reports reveal that in addition to periodic quantitative screening and expectations for near-flawless recordkeeping, proactive, dedicated client service and transparency into portfolio decision-making are must-haves when it comes to provider selection and satisfaction. These and other findings are included in DC Market 360°™, a Cogent Reports™ study by Market Strategies International.
The study examines the process of evaluating and selecting DC plan providers and investment managers from three critical perspectives: DC consultants, heavy DC advisors and DC plan sponsors. Participants were asked to share real-life examples for switching firms and outline the steps used to select new providers. The result: DC plan provider consideration pivots around personalized and accountable client service. While DC investment managers are heavily evaluated on a variety of quantitative factors, access to the portfolio manager and investment teams is vital to establishing trust.
“It seems so basic, but for DC plan providers to be considered, they must establish human-to-human accountability and trust,” said Sonia Sharigian, product director at Market Strategies and author of the report. “Oftentimes, recordkeeping woes stem from being bounced around call centers or feeling lost in the shuffle. On the investment manager side, we heard complaints of managers being dodgy during periods of underperformance or failing to communicate clear investment strategies with stakeholders.”
According to the study, having a dedicated client service team and providing continual updates when problems arise are vital for plan providers in maintaining strong relationships with their clients. Many research participants also believe that having access to investment teams or educated portfolio representatives who can provide insight into day-to-day inner workings of the funds is paramount.
“This research is particularly relevant because it explores the intricacies of brand trust, a key consideration driver we continue to see across all of our Cogent Reports studies, whether it’s among DC plan sponsors, advisors or affluent investors,” added Linda York, senior vice president at Market Strategies. “Specifically, DC advisors and consultants admit they are more likely to recommend providers they have strong working relationships with—even those who have made mistakes but turned things around. Establishing a deep level of trust can shield a firm from potential outflows during periods of underperformance.”
About DC Market 360°™
Cogent Reports conducted a series of online discussion boards, virtual ethnographies and in-depth telephone interviews with DC plan sponsors, heavy DC advisors and investment consultants in October and November of 2017. The study included a representative mix of 30 DC plan sponsors who are likely to switch plan providers and/or DC investment managers, 34 DC advisors managing at least $50 million in DC AUM and 20 consultants focused heavily on servicing DC clients. Due to its opt-in nature, these qualitative methods (like most others) do not yield random probability samples of the target population. As such, it is not possible to compute a margin of error or to statistically quantify the accuracy of projections. Market Strategies will supply the exact wording of questions upon request.
For more information on DC Market 360°, review an overview of the report.
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