New MassMutual study underscores importance of an effective value proposition for retirement plan advisors. Yet, few advisors articulate their value.
ENFIELD, Conn. – Employers that sponsor retirement plans are more likely to work with a financial advisor who offers a specific value proposition of capabilities and services, something few advisors articulate, according to new research from MassMutual.
“MassMutual’s research points to what we call the ‘winning combination,’ the key values that employers want from a financial advisor who services and supports retirement plans,” said Elaine Sarsynski, Executive Vice President, MassMutual Retirement Services and Worksite Insurance. “Our study shows that advisors often aren’t practiced in succinctly articulating their added value. There are clear opportunities for advisors to enhance their practice management to reflect plan sponsor preferences.”
The MassMutual Winning Combination Study polled 565 employers that sponsor retirement plans, including 449 that worked with an advisor and 116 that did not, with retirement plan recordkeeping assets from less than $1 million to as much as $75 million. In addition, the research included two focus groups with plan advisors. The research was conducted last summer and fall by Greenwald & Associates.
As part of the research, employers or “plan sponsors” were presented with a handful of different retirement plan advisor “personas,” each with a distinct value proposition, and asked to choose what combination of values would be most helpful in managing their retirement plan. Overall, plan sponsors say they prefer to work with a plan advisor who emphasizes employee education, good customer service and reducing plan costs as core to his or her value proposition:
Education: Employee education and advice is universally valued by employers, with many saying they want more frequent educational sessions for employees from advisors. However, advisors say employers are not always willing to make time for their employees to participate in educational meetings.
Service: Being responsive and accessible, listening and responding to needs, and resolving problems are the keys to good service, employers report. Plan review is especially important as a service to employers that rely on advisors. MassMutual supports plan review through its PlanAlytics program, which helps advisors and sponsors determine retirement readiness for individual participants and, on an aggregate level, the relative health of a plan.
Cost: Employers want advisors to help lower the overall costs of the retirement plan, including negotiating with providers, reducing investment fees, and attracting more assets to the plan to keep costs low. The importance of costs was relative, however, as employers that did not currently work with an advisor emphasized costs more than employers that do work with an advisor.
The “winning combination” of values is especially important to smaller retirement plan sponsors with less than $25 million in assets, according to the study. Sponsors with $25 million to $75 million in assets confirm those values are important but say they have broader needs. Larger sponsors are more likely to want help from advisors with additional services and capabilities, specifically advice on plan design, investment selection, fiduciary support and help with other benefits.
“While employers clearly gravitate to retirement plan advisors with specific attributes, our research shows that few advisors succinctly articulate their value proposition or can give an elevator speech about their value,” said Mathew Greenwald, President of Greenwald & Associates. “Advisors who can clearly articulate their value and differentiate themselves from their competition have a real edge in the marketplace.”
Overall, MassMutual’s study finds that 93 percent of employers say their retirement plan advisor is valuable, especially when it comes to customer service, advice on investments and problem solving. Employers that rely on an advisor to support their retirement plan are more likely to be:
- Engaged in promoting retirement plan participation and employee financial wellbeing overall,
- Confident their employees are saving enough for retirement, and
- Active in reviewing their retirement plan, including investment performance and education effectiveness.
However, employers also say that their advisors can do a better job on some fronts, including educating employees in group meetings, providing insights on how to lower overall plan costs, and providing information on new developments for retirement plans, according to the study. Smaller employers with plans of less than $1 million in assets say they need help in keeping up with new developments.
“MassMutual’s research is providing insights and information that we intend to share with our advisors to help them better manage their retirement plan practices,” Sarsynski said. “We will also use the information to guide us as we create new and enhanced services and support programs.”
Founded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyowners. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyowners consistently since the 1860s. With whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company’s strong and growing network of financial professionals helps clients make good financial decisions for the long-term.
MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, LLC, Member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.