Advisers Not Keeping Pace with Small Market Needs

Win / Loss analysis article

October 24, 2011 — Although advisers have a higher approval rating than recordkeeper relationship managers among mid-market plan sponsors, they have been struggling to keep pace in the small-market, according to Richard Schroder, President of Anova Consulting Group.   —

Offering an expanded explanation of research released earlier this week, Schroder told PLANADVISER that in Anova’s survey of 1,080 plan sponsors (700 from small plans with less than $5 million in assets and 380 from mid-sized plans of between $5 and $25 million in assets), the small-market sponsors tend to rate their day-to-day relationship manager (RM) at a provider higher than they rate their adviser (see “Sponsors More Satisfied with Providers than Advisers”).  The “advisers” in question cover a range of business models, Schroder noted—including those associated with a wirehouse or an independent registered investment adviser (RIA).

“However, when we move up-market, advisers tend to score better than platform relationship managers,” he said. The difference is not as wide in the mid-market as in the small-market though—in the $5-$25 million plan range, advisers’ overall approval rating is about 87%, versus 86% for RMs. So it’s better, but not by much.

The sponsors were asked to rate their adviser and RM on a 7-point scale. The areas they were asked to rate included overall satisfaction, frequency of contact, problem resolution skills, responsiveness, accessibility, proactive approach, and product knowledge. Schroder said the areas in which advisers consistently outperform RMs are in frequency of contact and accessibility.

“The one area where universally people need to improve is on proactively managing the relationship.  This is true for all types of service people—advisers and RMs,” Schroder noted. “Generally, service personnel receive ratings that are 10-15% lower in the proactive approach metric versus other metrics like knowledge or responsiveness. They need to get out in front of the sponsor and be proactive to address issues before they blow up.”

As for RMs receiving higher satisfaction ratings than advisers in the small-plan space, Schroder says this has been consistent over the last five years.  “Sponsors tend to see the relationship manager at a recordkeeper as a strength.  Advisers aren’t exactly a weakness, but they aren’t a strength either,” he said.

Schroder recognized that it hard to assess how much involvement the adviser is trying to have with the small-market plan sponsor when surveying the sponsors. “Some advisers want to be very involved, others want the provider to take care of the clients while they just want to be involved in the higher level needs like investment selection or perhaps education. Others want a hybrid approach. It’s hard to quantify from the sponsor,” he said, suggesting that if an adviser chooses to be more involved with his small-plan clients, he would score better in the survey.

“Small-market providers have done a much better job of improving their service levels and advisers haven’t kept pace,” Schroder observed.  “As outsourcing relationships get solidified and more entrenched, and as large-market customization rolls down hill, it’s germinating into better service for the small-market sponsor.”