Key Considerations for Record Keeper Partnerships
In the latest episode of 401(k) Real Chat, Fred Barstein, CEO of TRAU, TPSU and 401kTV, continues the discussion with Mike Shamburger, head of Core Markets and Retirement Plan Sales at T. Rowe Price. As industry leaders, they delve into crucial factors that retirement plan advisors (RPAs) should consider when selecting a record keeper for their business.
Quality of Product Offering
At the core of Shamburger’s message is the importance of product quality. He underscores that advisors need to deliver the best possible value to their clients and participants. A strong product offering not only enhances client trust but also aligns with advisors’ goals of fostering long-term relationships. As Shamburger states, “Quality product is going to be really, really important for them.” Choosing a record keeper with a robust product lineup is essential for advisors seeking to elevate their service offerings.
Service Delivery as a Key Metric
Another significant factor highlighted by Shamburger is service delivery. Effective service plays a vital role in how efficiently an advisor can manage their practice. A seamless service experience leads to higher client satisfaction and, ultimately, stronger client relationships. T. Rowe Price’s track record speaks for itself; the firm has led the industry in client satisfaction within the Chatham universe for the past seven years. Shamburger notes, “There’s a real benefit to that for the advisor because they know they’re getting high-quality product and service delivery.”
Commitment to the Retirement Market
Advisors must also evaluate the long-term commitment of record keepers to the retirement industry. Shamburger recounts past experiences where disruptions occurred due to companies exiting the retirement space, underscoring the potential fallout for advisors and their clients. A record keeper’s stability and dedication to the retirement sector are essential for reducing risks associated with potential business changes.
Understanding Revenue Models
As the industry faces fee compression, understanding a record keeper’s revenue model is increasingly important. Shamburger explains that conflicts can arise when record keepers prioritize their revenue needs over those of the advisors. “At times, we’re seeing record-keepers now…creating conflicts sometimes with advisors,” he notes. T. Rowe Price aims to eliminate these conflicts by maintaining a simplified business model that combines top-tier record-keeping and asset management, creating a sustainable economic structure for both parties.
Read the Full Transcript Here:
Fred Barstein:
Greetings and welcome to 401(k) Real Chat, where we interview leading and innovative DC industry leaders. My name is Fred Barstein, CEO at TRAU TPSU and 401kTV, and contributing editor at WealthManagement.com’s RPA omnichannel. Today we are chatting with Mike Shamburger, head of Core Markets and Retirement Plan Sales at T. Rowe Price. Welcome, Mike.
Mike Shamburger:
Thank you. Thanks for having me, Fred. I appreciate it.
Fred Barstein:
Mike, what are the most important factors that RPAs should consider when deciding which record keeper they should be partnering with?
Mike Shamburger:
That’s a great question, Fred. I think there’s two factors that are kind of table stakes that most advisors would probably agree on and are conscious of today. I think one of those is just quality of product offer. Their goal is to maximize the amount of value they’re delivering to their clients and their participant base. So quality product is going to be really, really important for them.
I think secondly, service delivery is really important because that dictates how efficient it is for that advisor to manage their book of business. Also, there’s a halo effect, too, with client satisfaction. The last seven years in a row, T. Rowe’s led the industry in terms of client satisfaction within the Chatham universe. So there’s a real benefit to that to the advisor because they know they’re getting high quality, both product and service delivery.
There’s two other factors that I think should be on their radar. I think one is the business model. Meaning do the firms that they’re working with have a long-term commitment to retirement? I’ve been through that with a prior employer where we actually exited or sold the retirement or record-keeping business at that point. The amount of disruption that created for advisors that I saw personally will boggle your mind. If they have a large book of business and there is an acquisition situation, that’s a real challenge for their practice. So I think that the commitment to the business, the scale that the record-keeper has within the business, is that sufficient?
Then better understanding their business models too. How do they make money and how do they run a successful business going forward is going to be more and more important. Because at times, we’re seeing record-keepers now because of fee compression, they’re creating conflicts sometimes with advisors where they need to maximize their revenue on their side to make record-keeping sustainable, while the advisor is at odds with that because they’re trying to maximize their revenue on the other side.
At T. Rowe, we don’t have that type of conflict. Our business model is simplified. We combine best-in-class record-keeping with best-in-class asset management, and that creates a really healthy, sustainable, and attractive economic model for us. I feel like we’re positioned really well to meet those needs for our advisor base.
Fred Barstein:
Great. Thank you.
