In our struggling economy, banks haven’t escaped a renewed emphasis on the bottom line. Like other businesses, they’re watching every dollar and asking, what are our core strengths? Why do customers buy from us? Which products and services are critical? Is there anything we do that someone else does better and at lower cost?
When it comes to retirement plan operations – particularly recordkeeping – the answer to the last question often is yes. Firms that specialize in recordkeeping can do the job more efficiently. This simple realization – that partnering with a leading recordkeeper can be beneficial – is often a step toward enhancing a bank’s retirement plan business.
Advantages to Outsourcing Recordkeeping
Transitioning recordkeeping to a specialized firm provides several benefits. A financial institution that partners with a recordkeeper often can reduce or reallocate staffing costs.
Outsourcing the recordkeeping function frees up the business to focus on providing value-added retirement plan competencies, such as consulting on plan design, providing investment insight, and helping with participant education.
Banks that outsource can take advantage of private-label branding and servicing, which lets them continue to be the “face” to their clients.
Recordkeepers also offer strategic servicing. This often includes promoting and supporting ongoing plan sales as well as offering other value-added programs to the partner’s clients, such as self-directed brokerage accounts, advice products, and access to other retirement services including nonqualified plan administration and benefit approval services. Finally, working with a recordkeeping partner provides clear financials and best-of-breed service to customers.
Recordkeeping Specialists Capitalize on Scale
As fewer employers provide traditional pensions, Americans are relying more on defined contribution savings plans. As a result, Congress is increasingly interested in DC plans – often leading to increased regulatory and legislative requirements. For firms that specialize in recordkeeping, these additional requirements aren’t nearly as challenging as for banks that recordkeep as a byproduct of their retirement plan offerings.
Likewise, firms specializing in recordkeeping can leverage their scale to offer the latest technology and newest products. A 403(b) provider, for example, wants a recordkeeping partner with the common remitter and aggregator services needed to compete in this market.
Common Myths About Outsourcing
Some believe institutions must perform recordkeeping to be in the retirement business and that partnering is a step to exiting the business. At FASCore, which specializes in recordkeeping, our experience is the opposite. All of our partners continue to grow their retirement business.
Our partners’ decision to use FASCore for their recordkeeping allowed them to focus on their client relationships while working with a premier recordkeeper focused on low-cost, high-quality regulatory compliance, technology, and product and service enhancements.
As we know, successful businesses capitalize on their strengths and rely on specialists to complete their suite of offerings.
Jennifer R. Chmel leads the sales of recordkeeping and administrative services to banks, mutual fund companies, brokers, and other financial institutions for FASCore, LLC, a subsidiary of Great-West Life & Annuity Insurance Company. She is a member of SPARK and ASPPA.