“The primary barrier to bundling among both unbundled and semi-bundled plan sponsors is their unwillingness to sacrifice investment flexibility and increase their fiduciary risk in exchange for promised administrative efficiencies and cost savings.
Waltham, MA (PRWEB) March 30, 2012
Nearly half (48%) of plan sponsors who are not fully bundled indicate they would be open to bundling their retirement plans if convinced of the benefits, according to a new study released by Chatham Partners, “2011 Trends in DB Bundling and Total Retirement Outsourcing: Evaluating the Opportunity in a Recovering Economy.”
The comprehensive study focuses on six areas: attitudes toward current plan management approach; perceptions of the benefits of Defined Benefit (DB) outsourcing, Total Retirement Outsourcing (TRO), and Total Benefits Outsourcing (TBO); likelihood of changing a plan’s management structure; satisfaction with current providers; decision-making process for selecting providers; and the role of investment capabilities in bundling. To complete the study, Chatham surveyed 259 sponsors of plans ranging in size from under $10 million in assets to over $1 billion in assets. Additionally, Chatham interviewed 21 consultants and financial advisors who have conducted TRO searches in the last 12 months.
While prior analyses of the DB, TRO and TBO market conducted by Chatham Partners revealed lower projected growth rates than most providers had hoped for, the 2012 study shows that plan sponsors and intermediaries are poised for an increase in bundling activity over the next 12 to 24 months.
The study found that most semi-bundled sponsors agree that time and resource savings and lower administrative fees are likely outcomes of bundling. However, along with unbundled providers, they are unwilling to sacrifice investment flexibility to achieve these outcomes. Further, unbundled providers do not believe that the promised outcomes of bundling are achievable. Providers will therefore need to develop new and more convincing ways to deliver the outsourcing message and more clearly demonstrate the benefits of increased bundling. In addition, savvy providers should try to capitalize on the sharp rise from 2008 in the bundling of non-DB services with DB packages, including defined contribution and health and welfare administration.
According to Chatham Partners’ CEO Peter Starr, “Our data shows that the primary barrier to bundling among both unbundled and semi-bundled plan sponsors is their unwillingness to sacrifice investment flexibility and increase their fiduciary risk in exchange for promised administrative efficiencies and cost savings.” In order to engage a single provider for both administrative and investment services, sponsors must be convinced that investment solutions can stand on their own.
Bundled sponsors, on the other hand, are unlikely to revisit their decision to bundle, but almost 40% will consider switching vendors. According to Starr, “Our findings reveal that service levels have become harmonized throughout the industry, and there is increasing price sensitivity.”
The study suggests that providers need to demonstrate their commitment to the DB business, as well as the unique benefits of their service model, particularly in the areas of participant experience and education.
About Chatham Partners
Chatham Partners provides customized market research including Win/Loss sales analysis and client satisfaction studies, multi-client research studies, and strategy consulting services that help businesses understand the explicit, implicit, and latent needs of clients and prospects. Our fact-based analysis and recommendations enable organizations to improve sales processes, client service/retention, product/service offerings, and market perceptions. (http://www.chathampartners.com).