Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Money Management Executive can deliver.
  • Exclusive Online Only Content
  • Free Daily Email News Alerts
  • Asset Management Blogs

Capturing RolloversRequires Full Service


BOSTON - Increasingly, competing in the retirement market requires plan providers to offer more than products, according to industry executives. Providers need to market a variety of services to plan sponsors and their participants and provide guidance and information on issues that may not relate directly to investment products, executives said.

Sponsors are demanding a wider variety of products and services from retirement product providers, according to Glenn A. Dial, vice president and national sales manager for Ceridian Corporation of Minneapolis, a benefits administrator and service provider. Besides offering 401(k), 403(b), 457 college savings plans and other financial products, plan providers need to fulfill a human resources role in providing plan benefits to the sponsors they serve, he said.

That means offering a bundled approach to retirement services, he said. Sponsors want payroll integration, customized benefits to assist in recruiting, tax filing services, benefits billing, IRA rollover and COBRA coverage from one provider, Dial said.

"Plan sponsors want a variety of services," he said. Sponsors want a multi-product offering, some sort of investment advice, customer service and access to brokerage services, he said.

Dial spoke at a conference here last week on capturing and retaining IRA rollover assets, sponsored by the Institute for International Research of New York.

The need for bundled services will probably bring consolidation within the retirement services market, resulting in mergers and partnerships between record keepers, plan providers, banks and brokerages, he said. In the next three years, the retirement market will consolidate to the point where ten large providers will manage 90 percent of retirement plans, Dial said.

In order to market a variety of investment services within the retirement market, plan providers need to focus on retaining IRA rollover assets, said Ellen Fiensand, president of D&G Consulting of Cambridge, Mass. The challenge for 401(k) plan providers is to change their largely "behind the scenes" status with most plan participants and actively introduce them to their retail services, she said. In order to do that, program providers must offer sponsors a plan that offers customized services, low prices and a communications program that gives participants information on investment products and life events that affect their financial well-being, she said.

By providing services "more related to taking care of the whole employee and not just the investor," plan providers can develop a relationship with plan participants that will prompt more participants to keep their assets with the provider upon retirement or a job change, said Fiensand. Those services can include advice on what to do with an elderly parent who needs long-term medical care or how to select and finance a college education, she said.

Such communication efforts need to be promoted to employees through education seminars and websites that allow employees to research the benefits and services available to them, she said.

But establishing closer ties with plan participants through additional services and education efforts is not easy because many plan sponsors are wary of plan providers marketing their products and services to employees, according to J. Daniel Horrigan, vice president of sales and distribution for MassMutual Trust Company of Boston. Much of that wariness stems from sponsors' concerns about fiduciary responsibility, he said.

"They don't want to look like they are endorsing [the provider]," Horrigan said.

However, providers need to inform sponsors of the benefits of creating closer ties to participants through education programs, he said. Such programs increase employees' understanding of their distribution options and cut down on the number of inactive participants that leave money behind in their 401(k)s, he said.

Providers need to assure sponsors that rule 404(C) of ERISA regulations provides sponsors relief from fiduciary responsibility for the results of participants directing the investments of their accounts, he said. They also need to call plan sponsors' attentions to the Department of Labor's interpretive bulletin issued in 1996, which "urged employers to do more, not less, when it comes to investment guidance," he said.

In offering sponsors a retirement plan, retirement plan providers need to think about all levels of employees and make the plan as basic or customized as possible, said Pat Martin, vice president of retirement services for FleetBoston of Boston.

"We need to have a program that cuts across all levels of customers," she said. With an eye on creating a retirement program that is easy to understand and easy to use, FleetBoston does as much data mining on its retirement clients as possible, she said.

On the company's retirement program website, FleetBoston addresses issues such as college savings and medical costs, Martin said. However, the firm attempts to target more specific groups using data it has collected about individual participants, she said. For instance, when an employee reaches the age of 55, FleetBoston invites him to a seminar discussing retirement issues, she said.

The firm also holds seminars for participants that are part of a large layoff as well as newly hired employees, she said.