Insurance companies and investment firms offering retirement services to companies large and small are learning that attention to detail and improved communication with the plan sponsors and, indirectly, plan participants can dramatically improve their customer retention and satisfaction rates.
A Chatham Partners survey of more than 5,000 companies using retirement services from its consulting and research clients found that customer satisfaction rates across the board peaked at "6" on a seven-point scale last year, up from previous high of 5.9 set in 2009.
Chatham Partners, which developed a "The Voice of the Customer" market research and consulting program for 18 of the nation's 25 largest retirement services providers, found that clients who did the best job of soliciting their clients for advice and feedback and effectively implemented those suggestions into the way they manage and provide retirement programs not only achieved higher customer satisfaction ratings but also improved their chances of retaining those clients in this ultra-competitive sector.
"These plans are tremendously complex to manage," says Chatham Partners CEO Peter Starr. “The government has a large role in issuing rules and compliance requirements because this is all tax-deferred money. There are a lot of logistical communication issues for these plan sponsors and the more service providers can do to make managing all of these issues easier, the better the chances they'll retain them as customers."
The survey found that 61% of its clients' customers defined themselves as "loyal," up from 53% in 2007. That's especially encouraging, Starr said, considering the horrific economic conditions and market performance that occurred during this three-year span.
"From a plan sponsor perspective, through 2007, 2008 and 2009 you saw the Dow dip down to astronomically low levels," he said. "It was a scary time and as a plan sponsor, you're a fiduciary for this program. Now that you've come through it, you have a much different set of expectations [of your plan provider] than you did when you went into it."
More disclosure and specific, detailed information about investment products and services is now essential for plan sponsors and the service providers charged with helping tens of millions of Americans fight and claw their way back to a reasonable state of retirement readiness.
Providing more online services for adding new participants, helping them manage their portfolios and deferrals, supplying a variety of investment vehicles and giving them detailed and easily digestible long-term investment advice are also viewed as key differentiators by plan sponsors who may be looking to jettison their current provider.
"Trillions of dollars are invested in these types of programs and it costs providers a lot of time and money to find new customers," Starr said. "The at-risk constituency we tracked has an expected attrition rate of 15% to 20% or more. When have 40,000 clients or more, as many of these firms do, that's a huge problem and it's incumbent on them to do whatever they can to improve their retention rates."
Finally, it's not enough these days to simply deliver a "satisfactory" customer experience and keep your attrition rate in single digits. With so many options available to companies and plan sponsors, it's critical to get existing clients to become your best sales reps.
Chatham Partners' survey found that clients using its "The Voice of the Customer" program attained a 59% "net promoter" score, essentially meaning that almost six in 10 of their existing customers would advocate for their retirement services with their peers — well above the industry benchmark of 49%.
— Barrett writes for Financial Planning magazine, a SourceMedia publication.
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