Financial advisors who participate in the 401(k) arena must make a concerted effort to strengthen their relationships with existing plan sponsors, according to a new report from Fidelity Investments. This effort can result in a 40% increase in revenue over 10 years, versus advisors who do not put forth the effort.
Growing a 401(k) Practice From the Inside Out compiled the results of two Fidelity studies, one which surveyed plan sponsors on their satisfaction with the advisors they use to help with their 401(k) plans; the other surveyed advisors who sell 401(k) plans.
Plan sponsors are most concerned with the level of their advisor’s support and knowledge and less focused on fees, investment choices and their relationships with company executives. Though they say services, including employee communications, group investment meetings, proactive check-ins and industry updates are important to them, sponsors say are less satisfied with their advisors in these areas.
The report shows that sponsors that are more satisfied with their advisor tend to stay with that advisor for a longer period of time. Those who are more satisfied say they expect their relationship with their advisor to last 11 years, three years longer than less satisfied sponsors. More than 50% of sponsors say they are satisfied or very satisfied with their advisor.
Advisors cited competition from other advisors as their top growing challenge in trying to acquire new plan sponsors. More than 90% of plan sponsors say they are solicited by other advisors at least once a year, while nearly 60% are solicited at least three times each year.
“In such a competitive market, advisors’ relationships with plan sponsor clients are more important than ever,” says Tom Corra, senior vice president of Retirement Product and Services for Fidelity Investments Insitutional Services Company in Boston. “We believe that advisors who can strike a better balance between servicing their plan sponsor clients and prospecting for new business, and can build a more efficient model for delivering what plan sponsors want, will be better positioned to drive profitable growth.”
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