Recordkeeper/Adviser Partners Key for Plan Success

Two senior retirement industry executives—one from an advisory firm and one from a recordkeeper—discuss how the two types of service providers can work together for better plan sponsor outcomes.

Our sister brand, PLANADVISER, held its national conference this week in Orlando. As part of one panel, two experts discussed how advice and recordkeeping service providers can work together for better plan sponsor outcomes.

According to Joe Ready, executive vice president of Wells Fargo Institutional Retirement and Trust, dedicated retirement plan advisers’ most effective service delivery partner should be their recordkeeper. If it isn’t, it’s time for them to find another recordkeeper.

“Mutual agreement upfront and mutual service from the recordkeeper and the adviser are foundational to good plan sponsor outcomes,” Ready said. “When the recordkeeper supports the adviser, and the adviser knows the recordkeeper inside and out, it absolutely leads to better ideas and better best practices.”

Working together throughout the process of running a retirement plan will certainly bring better outcomes and increased satisfaction from the plan sponsor, agreed Randy Long, managing principal at SageView Advisory Group. He observed that, earlier in his career, winning a new advisory client almost always meant converting them to a new recordkeeper.

“Today the process essentially works in reverse,” he explained. “Starting in the last 10 or 15 years, the industry has really evolved, and we’re commonly winning new clients through our recordkeeper. It’s a client on the recordkeeping platform looking for a new adviser, which only makes things easier from the participant perspective.”

The benefits that arise from close coordination between adviser and recordkeeper are myriad, the pair explained. From greater plan management efficiency to more advanced reporting and faster data updates, a skilled recordkeeper/adviser team can really turn up the heat on plan view-ability and performance.

For those advisers who feel it’s important to maintain a coolheaded distance from the recordkeeper in order to promote an image of independence and transparency among clients, Long says that’s great, but this doesn’t mean the adviser has to coordinate less with the recordkeeper or be a less-effective partner.

“You can maintain your independence while presenting services in a highly coordinated and effective way,” Long said. “That’s something we have strived pretty successfully to do, I think. Just remember, the end goal is always to put the client first and keep the client happy, both for adviser and recordkeeper.”

NEXT: (Careful) collaboration is key

While more-effective partnering between recordkeeper and adviser can improve efficiency for all plan stakeholders, Long and Ready agree that problems can arise, especially when duties are not carefully and clearly divided among service providers.

“For success with adviser and recordkeeper, keeping the duties and responsibilities clear will always be a key effort,” Ready said. “Successful collaboration means maximizing use of data by all parties and proactively creating the best relationships we can among the sponsor, the adviser and the recordkeeper.”

Ready said one area in particular where advisers and recordkeepers should work more aggressively together “is around the cost-versus-value question,” referring to the ongoing market trends squeezing advisory and recordkeeping pricing closer to unsustainable levels from a practice management perspective.   

“I don’t think recordkeepers or advisers have done a good job on navigating and taking charge of this cost-versus-value question,” Ready explained. “Neither side has done a particularly good job enumerating the value of our service deliverables. Instead we have focused on rolling out shiny new tools and services to try and justify our pricing. It’s unsustainable when you think long term and our challenge, industry wide, is to do a better job demonstrating our costs and how this relates to the value that is delivered.”

Long agreed: “If you think about what a given participant actually gets for his $100 or so in recordkeeping costs each year, it’s a huge value. Think about everything else you spend $100 on in a year and it’s probably worth a lot less than access to investments, asset custody and all the other services a recordkeeper actually provides.”

Both speakers concluded that recordkeepers, with their troves of data and ability to pull reports on demand, are particularly well-positioned to help advisers map out the value they are delivering to a plan. As Long explained, they can help the adviser identify and broadcast gains in key plan performance metrics experienced by the typical client, for example.

“We just haven’t connected the costs to the outcomes,” Long said. “We all know a $5 per year recordkeeping service is not going to deliver strong value, but how can we make clients better understand this? It’s a problem for advisers and recordkeepers to tackle together.”