A new study from MassMutual suggests that advisors trying to nab employer retirement plans as clients haven’t refined their “elevator pitch” and are not sure how to distinguish themselves in a world where services (such as investment selection) are becoming increasingly commoditized.

But to figure out how to pitch those retirement plans, advisors must know what employers want, and that’s a combination of more education for employees, good service and help with fiduciary responsibilities, said Elaine Sarsynski, executive vice president  of MassMutual Retirement Services and Worksite Insurance.

“Overall, retirement plan sponsors who rely on an advisor do more to encourage their employees to save for retirement and tend to focus more on their employees’ financial well-being,” said Sarsynski, speaking at a Midtown Manhattan luncheon on Tuesday. That’s a good thing. Also, those plans that work with advisors are more likely to feel that their employees are feeling more empowered to save and are on track to retire at the appropriate age.

The survey, called the "MassMutual Winning Combination Study," conducted last summer and fall by Greenwald & Associates, polled 565 employers, 449 of which actually work with advisors while the rest do not. “That was important because we wanted to better understand what precipitated the use of an advisor,” said Sarsynski. The study looked at plans that were $1 million to $75 million in size.

Although the study suggests that many plan sponsors are happy with their advisors, when they have them, there is a disconnect between advisors and employer-sponsored retirement plans over each one’s fiduciary responsibilities in the relationship.

“We expect this to be more of an issue as DOL [regulations] get released this spring,” says Sarsynski. “Nearly a third of our sponsors say they are not a fiduciary to the plan. Another 18 percent say they aren’t sure as to whether or not they are a fiduciary to their plan.”

As far as those plans with advisors, only 34 percent say the advisors are acting as fiduciaries, and 22 percent aren’t sure.

“This is kind of disturbing,” Sarsynski said, “but according to advisors, it’s not really that surprising.”

According to the study:

“Most of the advisors we spoke with [in focus groups] do not serve as fiduciaries to their clients’ plans, and they do not think they would be able to do so without help from an outside source such as the plan provider."

 

Regulations are sure to lummox up the situation even further. Under the Department of Labor’s proposed rule for retirement advice, advisors would be required to act in the clients’ best interest, which means more disclosure of their activities and an expansion of the kinds of transactions that need to be covered by a fiduciary’s more virtuous oversight.

The study suggests that tighter fiduciary standards would harm smaller plans because advisors may have to switch to a fee model from a commission model.

“Serving as a fiduciary would simply take too much of advisors’ time to be effective in their other responsibilities as an advisor,” the study says.

An advisor’s ability to educate employees is also a big deal to plan sponsors.

“The majority would like an advisor to educate employees on the retirement plan benefits as well as the importance of contributing to the plan,” says the study. “Sponsors who work with an advisor prefer more frequent education than they are currently receiving.”

“We had about 13 percent of respondents say they were dissatisfied with employee education,” said Sarsynski. “That would certainly be a red flag.”

For their part, advisors feel that they have a problem getting the plan sponsors to goad employees into education sessions. “Advisors find it difficult to motivate sponsors to schedule a time where they can come in and conduct group or one-on-one meetings.”

Customer service was also part of the “winning combination” outlined by MassMutual. By “good service,” respondents meant that advisors are responsive to plan sponsor needs and get back to them immediately with solutions. Also, plan sponsors expect their advisors to be problem solvers.

The answers in the survey changed somewhat depending on whether the plan sponsor had an advisor and the size of the plan. Smaller plans of less than $25 million were more cost-conscious, as were advisors with no plans.