If you had a question about a specific feature on a brand new digital camera you wanted to buy, who would you go to for personal, knowledgeable guidance: an employee in the electronics department of a big box store, or an employee at a boutique camera shop?
Most likely, the employee at the small shop is going to cater to you more than a large, national chain. The same concept holds true for employer-sponsored retirement plans. Large providers can often make smaller retirement plans feel unsupported and misunderstood.
When Does Using a Larger Provider Make Sense?
Employers may select a “name brand” provider for their 401k for a variety of reasons. Some of the common ones we hear relate to name recognition, payroll integration, or a prior positive experience. Larger providers can be an excellent resource for many businesses, especially the big ones.
When Does Using a Larger Provider NOT Make Sense?
While these providers have market recognition and offer many desirable features, smaller retirement plans can feel “lost in the shuffle” when they need hands-on support and proactive guidance.
Larger providers tend to segment their retirement plan clients based on the size of plan assets. Smaller plans are typically placed on a platform with limited options that promote the use of proprietary investment products and offer a service team approach for client support.
Employers dial a 1-800 number and may or may not speak to the same person each time they call. This usually isn’t an issue when things are going well. Unfortunately, employers tend to find the cracks in the foundation when an issue arises, and they spend a great deal of time working to find a resolution.
Are You Wasting Your Time?
The primary source of employer frustration is often that the client service team assigned to their 401k plan is acting as a liaison between the internal divisions of the company and employer. The employer gets a “cut and paste” response from the client service representative and when they ask a follow-up question, the client service representative can’t help. They’re just the messenger. The ongoing back-and-forth can result in miscommunication, stress, and wasted time.
Another factor in the frustration of smaller plans may be that the plan’s advisor (if they have one) is relying on vendors to provide the majority of support for daily plan needs. Advisors often leverage larger providers to scale their role and allow them to charge less.
Alternatively, the advisor may not have the necessary expertise or experience to assist a client, forcing them to rely on a vendor for guidance. This happens quite a bit with advisors who don’t work with retirement plan clients as part of their core service offering.
Whatever the underlying reason, if an advisor is not managing the communication and proactively seeking a resolution for their retirement plan clients, the employer is left to handle it on their own. Again, the cost is stress and wasted time, not to mention frustration.
Get the Attention You Deserve
We don’t mean to say small plans shouldn’t use large vendors. We just want to tell employers who are wishing for high-touch service and not currently receiving it that it does exist.
Smaller companies usually lack a dedicated benefits department, so the 401k responsibilities fall on the back of the business owner or an employee in the finance, human resources, or administrative function of the company. In these situations, an employer can greatly benefit from a navigator who can direct them through provider selection, ongoing administration and communication, as well as potential compliance hurdles that may arise along the way.
Adding an experienced retirement plan advisor to your provider mix can drastically change your experience. While you may hesitate to add more cost into the plan structure, think about the time you spend dealing with a provider directly to resolve issues.
Many experienced retirement plan advisors in the marketplace offer hands-on service and charge reasonable fees for smaller plans. If you’re tired of dealing directly with vendors and want more support for your 401k plan, it might be time to seek out an experienced retirement plan advisor.
If you want to know more about what a plan advisor can do for your company, download our ebook, “The Value of a Retirement Plan Advisor.”
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