There are often very subtle differences between the various recordkeepers vying for a retirement savings plan sponsor’s business. We often hear prospects saying that any of the candidates could do the job well and that it came down to “intangibles”. What are these intangibles?
In a recent NARPP study of DC plan sponsors we found that “trustworthiness” is the most important factor in selecting a new recordkeeper for 401k plans. This is not denying that technology, brand, service, investment decisions and performance matter. But these can often be fairly similar across recordkeepers in a sales competition.
When we start to look at the sales process through the prism of trust and how it is created (or not created), we gain an interesting perspective. The same NARPP study shows that only 8% of retirement plan sponsors feel that financial institutions (in general) can “just about always be trusted to do what is in their clients’ best interests”. Given this fact, your primary objective in a sales situation has to be establishing trust. And to establish trust, you have to understand the factors that build and erode trust.
This process of evaluating trustworthiness is primal in humans. We look for signals that indicate to us this person is safe and can be trusted. Knowing this, the question becomes, “what are the signals or symbols of trust that can be communicated in a business to business environment?
Certainly, a strong brand elevates a prospects’ trust of a firm but, a great brand alone does not raise trust sufficiently to be deemed trustworthy at face value or to unseat an incumbent.
In fact, the reason incumbents so often end up retaining the business is because incumbents have the advantage of being trusted by the retirement plan sponsor based on years of direct involvement. Conversely, the reason many incumbents are deserted by retirement savings plan sponsors is they have lost the trust of their clients. Trust is driving loyalty.
The price/quality/value arguments are all just ways of saying, “You didn’t overcome a serious trust deficit”.
One of the most common reasons for not selecting a 401k plan recordkeeper is price “the price was too high”. But we almost never hear a 401k plan sponsor say, “We selected our recordkeeper because they were the low-price bidder.” Price is important of course, but plan sponsors are willing to listen to a price/quality argument.
Therefore price or cost often becomes a convenient excuse for not selecting a candidate. It is certainly a more pleasant way to say “I don’t trust you enough”, or “I am not comfortable enough to select you”. Price, in these cases, should never be accepted as a reason for losing (or winning). Given the prospects’ mindset, when you hear “price” as a loss-factor, you should hear the words as, “You did not impute enough value to justify the price” and “You did not create enough comfort (i.e., trust and confidence)”.
Many losses are attributable to operational flexibility. It is critical to keep in mind that flexibility is also a trust symbol. It carries with it a great deal of meaning with regards to willingness to partner, placing the client’s needs first, and general trustworthiness. Prospects do not want a tight-fisted, inflexible partner. Stated alternatively, prospects want a provider who will work with them and they can depend on when things go wrong.
Intuitively we all know that trust is an important factor in all of our lives- including business interactions and transactions. However, it is arguable that trust is more important as a selection factor in service industries, such as 401k plan recordkeeping, because there is no tangible product. If I am buying a car, there is a tangible product for me to inspect, and I get a warranty against faulty workmanship. I don’t need to trust the dealer (and many do not) to buy the car. The car model becomes a commodity and price becomes the key selection factor. Trust is much less relevant.
In the absence of a product to show, your communications and interactions become the proxy for the product. Therefore understanding trust and the factors that build and erode trust should be as important as the details of the retirement plan.