Last week, Franklin Templeton Investments released study findings gathered from interviews they conducted with organizations that recently completed a retirement plan bid process. The aim of the study was to obtain some insights into the decision-making process behind their advisor selection.

In a press release announcing the study findings, Yaqub Ahmed, senior vice president and head of Investment-Only Division-U.S. for Franklin Templeton Investments, said, “Business development strategies, built with an understanding of the factors driving plan sponsor decisions, are critical when vying for business in today’s highly competitive retirement plan marketplace.”

Networking is Key when Pursuing New Plan Sponsor Relationships

The study found that most new business was won through referrals, meaning that financial advisory firms must focus on networking, not cold-calling.

  • More than half of plan sponsors reviewed at least five advisors when conducting their search.
  • 81% of plan sponsors actively sought advisors through recommendations or referrals from colleagues, peer organizations or retirement plan service providers.
  • Less than 25% of plan sponsors responded to an advisor solicitation.

Personal Fit Matters Most

When plan sponsors were asked what criteria they used to initially screen potential advisors, they cited:

  • “Personal fit/sales process” – 60%
  • “Pricing” – 53%
  • “Experience and expertise” – 44%
  • “Prior relationship” – 5%

Though fees are important, they are not a deal breaker for plan sponsors. It is also crucial for firms to realize that plan sponsors do not place a great deal of importance on their past relationship with a firm. A past relationship is no guarantee of future business.

Good Marketing is Essential

Just because an adviser has good investment results, doesn’t mean they will have clients waiting in line to give them their business. In order for investment advisors to win more business, a well-tailored marketing plan is key. Yaqub Ahmed explained to Darla Mercado of Investment News:

“Some practice leaders are the ones who are getting a little bit of PR on what they’re doing and being acknowledged for it. They’re named among the top industry advisers and have formal acknowledgements from third parties. That goes a long way.”

Above all, plan sponsors are looking for advisors who understand their unique needs and come to the table with a strategy that addresses the plan’s specific objectives.

In today’s competitive environment, in which very few plans change advisors in a given year, Franklin Templeton’s research provides a helpful perspective into how plan sponsors select their advisors, and how investment firms can better grow their business.

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