Retirement plan sponsors polled continue to express deep pessimism about service providers and retirement advisers, with trust in financial institutions at 8% (a slight dip from 2014’s 9%) and trust in their current plan provider at 58%, a loss of seven percentage points from last year’s 65%.
Survey respondents assessed their trust in a current provider by levels of agreement with the statement they “can always trust their provider to do what is right,” according to the Second Annual Plan Sponsor Trust & Confidence Study by the National Association of Retirement Plan Participants (NARPP).
The top factor for plan sponsors for choosing service provider is trustworthiness, which scores higher than participant customer service, quality of the customer experience, technology, education, administrative service and cost.
Calculating trust starts with the plan sponsors’ opinion of service provider competence, says Laurie Rowley, president and co-founder of NARPP. Can the service provider do the job they’re supposed to do? To assess actual trust, the survey asked plan sponsors to describe the amount of trust they have in financial institutions as well as their current service providers: “How much of the time can you trust financial institutions to do the right thing?”
The low numbers mirror the general public’s confidence in financial institutions, Rowley tells PLANSPONSOR, “which is quite low. Surveys by Pew Research and Stanford University, among others, show the general public’s trust in financial institutions hovers in the 10% to 11% range.”
In fact, she says, there seems to be quite a pall over the defined contribution (DC) industry, where people have more personal experience with financial institutions, including recordkeepers. In NARRP’s survey, trust scores for plan providers range from a high of 74% to a low of 24%, so there’s clearly room for improvement, Rowley notes, especially if plan sponsors consider the factors that both build and erode trust: accountability, following through on promises, and understanding needs of the plan sponsor and employees.
“I can’t think of a factor that’s more important than accountability and reliability,” Rowley says. “And that’s where the conversation needs to shift, to how well the provider is doing the job.” Plan sponsor dissatisfaction with a service provider can be an opportunity for discussion, the basis for a conversation between plan sponsor and recordkeepers to see how services to participants, for example, can be improved. “If you’re having a problem with education or service, the plan sponsor can point it out,” she says. Change won’t take place immediately, Rowley says, but the more people talk about it, service providers are going to have to level up their game.
“Building and restoring trust with both plan sponsors and consumers should be a top priority for financial institutions,” says Rowley. "Trust a plays unique and critical role in participant savings behavior—it is a key ingredient for sustained engagement and for improving retirement savings outcomes.”
The study’s data challenge some of the more traditional aspects of what drives loyalty and satisfaction, according to Rowley. “Trust is the bedrock of every brand,” she says. “It is key to participant engagement, and it is the most important selection and loyalty factor for plan sponsors.”
The top-rated service providers for 2015 are: Vanguard; Wells Fargo and Charles Schwab (tied for second place); and Transamerica.
The 2015 study includes measurements for:
- Trust levels with retirement advisers;
- Efficacy of service providers’ education programs;
- Attitudes about fees and fee disclosure; and
- Individual trust rankings for the major service providers.
The Plan Sponsor Trust & Confidence Study, fielded in March 2015, polled 1,226 plan sponsors ranging in size from less than $5 million to more than $250 million in plan assets (average $61 million). All major industry groups are represented in the sample. Developed by NARPP, Boston Research Technologies and Professors from Stanford University, the study is in its second year. Its goal is to set a standard for evaluating retirement plan service providers by measuring trust, and the characteristics that build or erode trust.
For more information about NAARP’s study or to receive a report, email the organization at contact@NARRP.org.