7 Smart Shopping Steps to Avoid Buyer’s Remorse

Shopping for a new provider is not something one would normally equate with a Black Friday foray or a Cyber Week scramble. But if you have a plan sponsor — or plan sponsor prospect — who’s thinking about shopping for a new provider, here are some ideas to share.

Make a list — and yes, check it twice.

In an area fraught with as much potential complexity as searching for a retirement plan provider, it’s easy to think you can learn what you need to look for by simply going through the process. And while it’s certainly a learning process, doing so without a sense of core needs is a bit like going grocery shopping on an empty stomach; everything will sound good, and you’ll likely overload on the “sugar” (and perhaps overpay as well).

Even Santa Claus makes a list — so should you: of plan design features (real and anticipated) that you want supported.

Don’t neglect the problems.

Odds are if a plan sponsor is serious about a change in providers, there’s a reason – and it’s usually a sign of trouble, a problem, or worse – more than one problem. Even if that’s not the primary motivation, even the most well-run plan and satisfied plan sponsor has in their memory some issues, service shortfalls, or perhaps service incapability that have left a bitter taste.

The best way to avoid disappointment is to be clear about expectations – making sure that those are detailed and shared plainly with potential providers, preferably with a preface of “what procedures/protocols do you have in place to prevent something like….”

Give yourself plenty of time.

There’s nothing quite like the adrenaline rush of snagging that last desired item from the store shelves or happening upon that cyber deal minutes before it is slated to expire. And yet those moments are surely outnumbered, if not eclipsed, by the many more times that those who defer action until the last minute walk away empty-handed.

Human beings are, generally speaking, poor judges of time requirements, particularly with things with which they don’t have a lot experience (like provider searches) and that require the involvement/input of committees (like provider searches). Even those who are lucky enough to accurately gauge and/or have sway over the multitude of unforeseen obstacles and distractions that inevitably emerge, may well find that the provider of choice has time restrictions of their own. The good ones tend to fill their on-boarding queues quickly, after all – and plan sponsors who make their decisions late may well find that opportunity door has closed.

Have — and know — your budget.

These services aren’t free, though we all know they may be packaged in such a way that the plan sponsor doesn’t have to write a check. At a minimum, plan sponsors should know how much they are able — and willing — to pay. Beyond that, whether they write a check or not, they’d be well-advised, as a plan fiduciary, to be attentive to the cost(s) of the plan, who’s going to be pay them, and how those who provide services to the plan will be paid, and by whom. And they should have a functional understanding of how that compares with alternatives (including the incumbent arrangement).

Remember that provider rankings are only a starting point.

I’ve never put much stock in online consumer ratings – even before we discovered that some of those are bought and paid for by the products/firms rated. Sometimes those ratings contain clues that can help inform your decision, of course, but I’ve never really understood the value in knowing what a complete stranger thinks/feels about a book, music album, movie or restaurant. Complicating matters is the very human tendency to “weigh in” mostly on things you absolutely love – or absolutely loathe. 

Think about it — a finite number of plan sponsors (often an infinitesimally small percentage of their actual client base) about which you know nothing – including all the things that factor into such perspectives – the complexity of plan design, capabilities of staff or breadth of perspective/experience or tenure with the provider – rate those provider capabilities on some arbitrary point scale, and from that some kind of satisfaction score is gleaned (sometimes, god forbid, it’s an average of averages).

It’s not a bad place to start, if only to winnow the field of consideration — but like those rankings on Amazon, they have a limited value in predicting YOUR satisfaction with that platform. They’ll more likely affirm your preexisting preferences or fuel your imbedded concerns, but they aren’t much benefit in creating new ones.

Trust — but verify — references.

Anybody who’s paying attention will vet references before passing them along. As a consequence, proffered references are, almost by definition, going to be positive (though I never cease to be amazed how many are simply dredged up from an old RPF file without being refreshed).

But even vetted and verified references can provide insights. Press for references that are similar in terms of plan size, design and complexity. It’s often insightful to look for a similar plan who has converted to their platform in the past year — better still, someone who has left that platform in the past year (though it will likely be due to M&A activity, not service or fees). Those who have recently transitioned can be a fount of real-world wisdom on things such as what questions they wished they had asked when they went through their process.

Get help.

Unless they are a serial provider shopper (and if they are, watch out), odds are they aren’t expert at the business of shopping for a provider. It is a complicated and time-consuming process, with an abundance of opportunities for disconnect in expectations simply because the “right” question(s) aren’t asked, and sometimes because the “wrong” answers aren’t recognized as such.
Plan sponsors are, of course, as an ERISA fiduciary, expected to review (and subsequently monitor) those that provide services to the plan with the skill and expertise of a prudent expert. Those who lack that expertise are expected to engage the services of someone who does.

Lest they wind up finding that all that shiny wrapping is just covering up what turns out to be a lump of coal instead.

- Nevin E. Adams, JD