The landscape of retirement plan administration is shifting, with growing emphasis on advisor-driven service models, fiduciary responsibility, and participant outcomes. In a recent nationwide survey conducted by Alliance Benefit Group (ABG), the nation’s largest consortium of independent 401(k) recordkeepers, over 1,000 financial advisors revealed the key factors they prioritize when recommending recordkeeping providers for small to mid-size retirement plans. This blog distills those insights into actionable takeaways for investment advisers.
Top 4 Decision Drivers for Recordkeeper Selection
1. Price and Quality: The Non-Negotiables
As expected, nearly 70% of respondents ranked cost-effectiveness and service quality as top priorities. Advisors are expected to deliver both high-performance platforms and cost savings. This balancing act makes transparent pricing models and measurable service metrics essential. Most independent recordkeepers have adopted this type of fee transparency.
2. Brand Name Recognition: Comfort Amid Complexity
Surprisingly, brand name emerged as equally important. Although some big name firms like Schwab did not rank among the top five by number of plans, their brand power offers sponsors reassurance. Advisors, especially those without strong personal branding or affiliation with national aggregators, often leverage well-known providers to build client confidence. However, this strategy is a contrast from the personal service most advisers identify as the reason their clients hire them.
3. Conversion Process Familiarity: First Impressions Matter
Advisors expressed strong concern about the conversion and onboarding process. They value dedicated service teams or relationship managers who anticipate and mitigate implementation challenges. The impersonal 800-number model was frequently criticized, with advisors emphasizing the importance of hands-on support and smooth transitions. This type of service is a core competency of the independent recordkeeper.
4. Missed Opportunities: Rollover and Retirement Age Notifications
A striking 75% of respondents reported their current recordkeeper does not share data on terminated participants or notify them when participants reach key retirement ages (e.g., 55+). This oversight represents a missed opportunity for advisors to offer rollover and retirement planning services. And it also raises concerns about institutional recordkeepers marketing directly to participants, potentially competing with the advisor’s wealth management services.
Independent vs. Institutional: Perception vs. Reality
Advisors noted a perceived gap in consulting sophistication between institutional and independent providers, yet the data suggests otherwise. An overwhelming 91% of independent recordkeepers began as TPAs, specializing in high-touch, high-complexity planning for professional firms. These roots often translate to a stronger service ethos and deeper customization capabilities. Moreover, local servicing options, while lower on the priority scale, remain a differentiator. In-person support during conversions or closings builds trust and reinforces long-term relationships in ways virtual tools often cannot.
Takeaways for Investment Advisers
– Ask the right questions: Look beyond name recognition, fees, and funds. Probe how recordkeepers handle conversions, participant engagement, and advisor support.
– Choose relationship over scale: A provider who offers tailored reports and avoids competing with your post-retirement services may serve your clients, and your practice better.
– Consider independent providers: Many offer enterprise-level service without the conflicts of interest that plague larger institutions.
Conclusion
As this survey reveals, 401(k) plan success depends on more than just low fees or big names. What 401(k) advisors value most in recordkeeper selection is readily apparent: partnership, personalization, and proactive service. For investment advisers, understanding what truly matters to peers and to plan sponsors is key to making smart, strategic provider recommendations and enhancing their standing as true fiduciaries.
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