At the onset of any long-term relationship, there is a first impression. For those of us in the retirement planning industry, those first impressions are often made and crystalized in transitions and onboarding with a new plan recordkeeper.
Working together in lockstep as advisor, TPA, plan sponsor and recordkeeper, there are many roles at the table when it's time to make a change in providers. But for the advisor, one's reputation hinges on the success of a smooth transition process. For this reason, transitions can be challenging.
That is why the experience should be seamless, coordinated and managed with a high degree of detail. You'll want a recordkeeper with a proven track record of partnership, clear communication and dedicated experts and specialists supporting you. A recordkeeper should also reflect well on the advisor and TPA during and after the transition.
According to the 2021 PlanSponsor Plan Benchmarking Report, 58% of plan sponsors surveyed reported that their organization has been using its defined contribution plan recordkeeper for more than seven years. (Another 12.3% said it has been more than five years but less than seven). So, when a transition does take place, it is likely to solve some sort of problem or to improve the plan sponsor's experience, quality of service or level of support.
Transitions may also be necessary due to industry consolidation trends in which the numbers of retirement plan recordkeepers continue to shrink.
The needs or events that necessitate a transition can vary, but the fact is changing providers takes a dedicated and detailed transition team, and creating a good team is worth the effort because, when done correctly, a good team can save a lot of time and money in the long run.
The Early Stages
Because you, as the advisor, often drive the selection process of a number of vendor partners, you are generally either directly assuming responsibility of selecting or influencing the choice of the recordkeeper.
In essence, you put your reputation on the line. When the recordkeeper fails to manage the transition successfully, there can be a number of unnecessary issues. In a transition, it's important to work with a partner who helps you think about all of the places where things can go wrong.
The impact of a bad onboarding process or transition can create ripple effects that erode trust and damage relationships. Because the onboarding experience happens so infrequently, it's critical to have the right expertise on the team to define roles and responsibilities, ensure communication is clear and to set and manage expectations effectively for everyone involved.
Communication
Setting the tone in the beginning of any long-term relationship begins with good communication.
It's important to set the right expectations and eliminate surprises in the new recordkeeper selection process, so that plan sponsors fully understand and are clear about what they are buying. And, when the advisor and wholesaler work well together to craft the right solution and set expectations correctly, the opportunity for a smooth transition process increases significantly.
In short, making sure that all parties involved in the transition have the information they want, in the way or format they need it, can be the key to success for a successful transition.
