Discovering New Territory
A retirement plan adviser who wants to expand his client base can try out a number of steps and strategies. One way to keep developing a focus, experts say, is to identify a target market—finding a specialty and seeking out strategic partners. Pinpointing such a market is fundamental, says Scott Buffington, national sales manager at MassMutual Retirement Services in Boston.
Although some retirement plan advisers might not believe they have a target market, many unknowingly have already developed one, says Jay Wells, an adviser at Foresight Wealth Management in Sandy, Utah. A close examination of their firm’s current book of business can reveal that a certain industry or a specific type of client dominates their advisory practice. “Examining why they have found success with this group can help advisers determine where to focus,” Wells says.
The right market can simply boil down to an adviser’s preference, says Joe DeSilva, senior divisional vice president for retirement services with ADP in Florham Park, New Jersey. “Some advisers may opt to service plans with a certain asset threshold, for instance,” he says, “or perhaps they have a deep understanding of the 403(b) marketplace and a base of clients [made up of] nonprofit organizations.”
The Best Focus
Just as advisers profile the ideal potential client, DeSilva
adds, they should think about fashioning a parallel profile to pinpoint the
best focus for their practice.
Size and type of plan, kinds of plan sponsor and/or participant services needed, industry and location are all factors to consider when determining a target market, according to Wells. Also key: matching the adviser’s strengths with the needs of the plan sponsor and participants. “An adviser may be particularly good at building relationships but weaker in technical knowledge, making him a good fit with small companies that value personal relationships over technical abilities,” he says.
Wells recommends honing in on developing trends and best practices in the retirement plan space. Increased scrutiny from regulators about fees and fiduciary issues are areas of growing concern for plan sponsors. “Becoming an expert in a particular area, such as fiduciary support, can help to distinguish you from other advisers,” he says.
Constructing improved investment menus, monitoring fund performance and lowering management fees for participants are all ways an adviser can add value, DeSilva says. “Acting in a fiduciary capacity by providing 3(21) services, in which the adviser offers investment advice, or 3(38) services, where the adviser controls the selection and monitoring of the plan investments, are two [distinguishing] specialties.”
The Benefits of Strategic Partnerships
“The best advisers use strategic partnerships and benefits
within a reciprocal relationship,” Buffington says. “We’ve seen advisers work
with property and casualty carriers as an effective strategy to leverage
small-business relationships,” he says. “There’s a convergence of benefits
going on—and a need for specialty advisers who understand retirement.” In
short, he says, people are looking for a general contractor.
“Advisers should work with recordkeepers, TPAs [third-party administrators] and asset managers to set goals with the sponsor for the plan on improving outcomes,” Buffington says. One goal, for example, could be providing projections for monthly income in retirement. Another could be boosting the percentage of participants on track to replace sufficient income in retirement.
Strategic partnerships and benefits within a reciprocal relationship can also help advisers prospect or increase service to a plan, Buffington says. Beyond the obvious advantages—i.e., advisers and other benefits providers introducing each other to potential clients and offering a holistic benefits solution that includes a retirement plan—advisers and benefits consultants can work together in many ways. For example, a joint presentation to plan sponsors can explain the impact one type of professional has on the other.
Several factors combine now to create demand for overall and overlapping planning and services: the dwindling number of defined benefit (DB) plans, the need to meet rising health care costs in retirement, and aging employees who may feel financially or emotionally unprepared to retire.
Plan sponsors are keenly invested in how different benefits interact from a cost/value standpoint. Buffington notes that workers’ compensation and disability insurance, for instance, can also be brought into the conversation. Advisers need to understand how these interact from the employer’s point of view. “Retirement is no longer a standalone conversation, but a holistic benefits conversation,” he says. When advisers work with others involved in that multi-part discussion, this can lead to new business opportunities.
Other Networking
Rick Shoff, managing director of CAPTRUST in Doylestown,
Pennsylvania, also believes that advisers can leverage their other business or
personal activities. He recalls a client that was owned by a private equity
(PE) firm. His connection there netted Shoff a host of introductions to people
in PE, which in turn yielded invitations to PE events, conferences and
luncheons. “I was not thinking, ‘I should get a client owned by PE—I’ll
understand that industry better and get more opportunities.’ But that is
exactly what happened,” Shoff says. Participating in community events, perhaps
with a charity or civic organization, can also trigger growth, as the adviser
gets involved with local business leaders.
Conferences, too, can be a way to interact with prospective clients, Wells points out. “Many industries have professional organizations or associations where advisers can look for speaking opportunities,” he says. “This helps establish the adviser as a professional in the industry and lends credibility” to his practice.
Shoff also recommends visiting a recordkeeper’s location to build relationships. “Go to its headquarters to meet the people working on your plans,” he says. “Many opportunities are at the relationship manager level. Invite them to visit with you.”
Shoff turned to one particular center of influence, an employee benefits firm, at a time when he was consciously expanding his business. “I spent a lot of time with them,” he says, “and together we looked for opportunities to take a mutual client to dinner or lunch.” As he made an effort to interact with the firm, the firm reciprocated, he says. “We worked to convince some plans why they should work with us, and that is when we were growing.”
A good relationship can open the door to many of the providers’ resources, Shoff suggests. A valuable one is a database of plan sponsors, searchable by any of a number of criteria: demographics or location, total assets under management (AUM), presence or lack of an adviser. All providers have such a tool, Shoff observes, whether or not they make it available as a value-add. “It certainly doesn’t hurt to say you’re trying to develop your market,” he says.
Shoff also recommends that advisers share leads with providers in the hope they will return the favor. He believes tools are overrated: “The best ‘tool’ is the people in the plan value chain who can have powerful and productive conversations with each other.”
When to Grow
Many advisers say service capacity is one of the most
important factors when deciding whether to expand the client base, DeSilva
says. “Can an adviser actually provide services to more clients? If the adviser
is at capacity, another important consideration may be whether there are
resources to hire additional staff to support clients.”
But the best reason to grow is that satisfied clients have referred you to other companies. “If you are running your practice well and doing what you say for clients, the referrals and introductions to new clients should force an adviser to grow in order to keep up with the demand,” Wells says. “Advisers should always be looking for opportunities to grow. In this business, if you are not growing, you are dying.”
The Cold— and Warm—Call Method of Prospecting
Targeted prospecting, what others might call “cold calling,”
is a cornerstone of the business acquisition strategy at The Kral Brown Group
of Merrill Lynch in Fairfield, Connecticut, says Dennis Brown, retirement benefits
consultant and senior vice president. The group specializes in plans with $2
million to $75 million in plan assets and looks for plan sponsors that care
about the outcomes of their workers and the retirement readiness of plan
participants. “If a plan sponsor is ready to engage and make a difference, I
think that’s a client we want, because that’s what we stand for,” he says.
The first call to a prospect is not completely cold, Brown admits—there is background work that goes into each initial inquiry. For example, the team members look to the Form 5500 and mutual fund partners for help in researching participation rates, among other items, or for testing challenges or other plan design elements. In addition to the quantitative details, the advisers search for keys to a firm’s culture. “We try to look at each company and find out a little bit more about it outside of its plans, so we can understand what its values are and what it stands for,” Brown says. They peruse a company’s website, mission statement and executive bios, among other things. “It’s amazing what you can learn from someone’s mission statement and how they talk about their employees on their website,” he adds.
Then, when that first prospecting call is made, the point is to open up a dialogue, not necessarily to sell a 401(k) plan. The adviser calling asks the sponsor-prospect about the goals for the plan and whether the plan is meeting the desired levels of success. If the sponsor is open to continuing the discussion, a meeting might be set up, or The Kral Brown Group might email a white paper about a particular topic of importance. What is vital to creating an ongoing relationship is that the adviser tells the sponsor, “‘If you have a question on your current plan on how it can be improved, we’re happy to help,’” Brown says, and, “‘We want to be a resource, not an interruption in your business.’”
His firm’s advisers will likely reach out to prospects three or four times a year, he says, though as soon as a plan sponsor declines, their calls will stop. Generally, however, the group may pursue a prospective client for two to three years. It is a long sales cycle, Brown admits, but the payoff is that when the sponsor is ready to make a change, The Kral Brown Group is top of mind. —PA