Cultivating Your Client Base

“Many plan advisers are great consultants, but sometimes they are not great marketers,” says John Carl, President of Retirement Learning Center, LLC, in New York, which helps financial services players such as advisers increase their retirement business. “If you are capable of understanding the ERISA [Employee Retirement Income Security Act] code, maybe you are not by nature a great marketer. The big challenge is, ‘How do I get in front of new clients?’”

Most advisers do not get into the business to be sales or marketing gurus, agrees Mike Byrnes, President of Boston-based Byrnes Consulting, LLC, which works with businesses including advisers, on their business and marketing plans. “Most have to challenge themselves where they do not feel comfortable, work on it, and become ­comfortable,” he says.

The key to developing new plan clients “is focus, focus, focus, focus,” says adviser Dorann Cafaro, Founder of Little Silver, New Jersey-based Cafaro Greenleaf. “It is not so much what you do [to recruit new clients]: It is keep doing the same thing, and do it over and over again. The more you do it, the better you will get at it.” Adviser Donald Stone, President of Chicago-based Plan Sponsor Advisers, says that finding new clients “is initially a pretty slow process but, once you have it working, it is very lucrative.”

Sources talked about these six best practices in developing an adviser’s client base:

1. Understand your value proposition. Winning new clients starts even before trying to meet them. “It is ­important that advisers really decide what business they are in, even if they are going to try to work in several markets,” Cafaro says. “The most important thing is for an adviser ­every year to sit down and say, ‘Who do I want to service?’ In addition, have a goal every year.” That could include things like adding five new plan clients with more than $5 million in assets, calling 25 client opportunities a day or ­hiring a service to provide the adviser with 25 meeting opportunities, or coming up with a strategy to keep the adviser’s name in front of each potential client.

Adviser Michael Kozemchak, Managing Director of Institutional Investment Consulting Inc. in Bloomfield Hills, Michigan, calls it “the elevator conversation”: being able to say in 60 seconds what you do and why an employer should hire you. Asked about the key skills advisers need to recruit new clients, Byrnes says, “a lot of the time it is just knowing your story, and how to differentiate yourself, and being able to do that crisply and clearly.” He suggests that advisers do a branding exercise, analyzing their own strengths and weaknesses as well as the competition. Advisers should think about what they want to communicate to potential clients about their client niche, years of experience and expertise, service levels, fees, and how they reduce employers’ exposure to fiduciary liability, he says. Then boil it down to a few sentences about why a sponsor should want to do business with you over others. “A lot of advisers cannot answer that question. People stumble over it,” he says.

Also, have a business plan for recruiting new clients, Byrnes recommends. “If you put something in writing, it is more likely that you will stick with it,” he says. That includes things like identifying target markets based on factors such as the size of the employer or industry type as well as doing a sales and marketing calendar.

2. Get to know the “influencers.” Sources most commonly cite referrals from other professionals as the best way to make contact initially with potential new clients. “We have utilized our relationships with attorneys, accountants, and other ‘influencers’ heavily,” Stone says of meeting new clients through other professionals. “The message is, we want to be a good partner to help them execute the appropriate steps with their clients.” Suggests John Bowen, CEO of San Martin, California-based adviser consultant CEG Worldwide LLC, “Learn how to play nicely in the sandbox with other professionals. So often, we are taught that we need to know everything, and we kick sand.”

Attorneys tend not to work with micro-plans but can be very helpful in making connections with mid-size plans of $20 million and up, Stone says, and play a critical role in meeting employers who have plans with hundreds of millions of dollars in assets. “However,” he cautions, “it takes time for an attorney to have the comfort level to refer you.” Starting to make that connection “sometimes is just a matter of picking up the phone and saying, ‘I would like to learn more about your ERISA practice,’” he says. “Other times, you meet influencers at a conference or other networking event.”

Every plan sponsor works closely with an accounting firm, Carl says. “Networking through professional groups like CPAs is a big deal,” he says. “In every community, there are big accounting firms and regional accounting firms. You want to get to know those people.” Volunteering to do educational talks for an accounting firm’s staffers who work with retirement plans has proved successful­ for advisers he knows. Likewise, he ­suggests similar networking with property and casualty insurers.

Bowen has seen advisers develop new clients by volunteering to do talks for­ ­local CEO groups, such as a theme of “the top 10 things they need to know today to make sure that their retirement plan is as effective as it could be,” he says.

3. Focus on asking questions in the first meeting. “Your first meeting is you with a piece of paper and a pen, and they do more of the talking­ than you do,” Cafaro says. “You are there, first of all, to ­understand their plans and their challenges.”

To prepare for that initial meeting, Stone and his ­colleagues research the prospect’s Web site to gain insight into its business, Google the employer to see what stories crop up that may apply to the plan and its operation, and review the Form 5500 or similar data. However, at the meeting, “the questions we ask are not canned,” he says. “They flow naturally from the dialogue with the prospect as we get them to talk about the plan, its operation, what concerns they may have, and what they are trying to accomplish.”

Do not waste time asking for basic information about a plan’s total assets or participants, since advisers can gather those publicly available details quickly. Before the meeting, print a copy of the employer’s full recent 5500, Cafaro recommends. At the meeting, she suggests asking a sponsor to talk about the plan’s population, its obstacles, how the retirement plan fits into the company’s overall strategy and management’s priorities, and how well its vendor relationship works. An adviser should bring some sample reports to give potential clients a sense of what they might expect to receive from the adviser should they hire him or her, she suggests, but do not leave the reports there after the meeting.

Rather than describing his company’s investment process and other selling points, Stone agrees that the first meeting should revolve around finding out what is going on with that employer. “Our initial meeting with the plan sponsor is not about us—it is about them,” he says. “If there is one failure that I have seen, it is advisers putting way too much ego into it, and wanting to tell plan sponsors about how wonderful they are. It is all about the adviser, in many cases.” That ruins the opportunity to have the potential client tell the adviser about the issues with its retirement benefits. “If you can ask the right questions and step on your tongue and not talk, you are really going to get somewhere,” he says. “That is where the opportunity is.”

4. Help keep potential clients up-to-date. How to go from initially meeting a sponsor to building ties that lead to signing a new client? “To me, it is education, education, education,” Carl says. “They need to be updated on the regulations, and how that translates into best practices. Maybe they are not a specialist in ERISA, and are covering other benefits, so they are really looking for that expertise­. From a plan sponsor perspective, try to increase their awareness that there are material risks that need to be managed like any other risk in the business.”

Plan Sponsor Advisors holds an annual sponsor confer­ence for clients and prospects in its base of Chicago: Last year’s conference had the theme “A Turning Point for Retirement Plans: Managing Your Plans in an Era of Increasing ­Responsibility” and included sessions on topics such as potential regulatory and legislative changes in Washington­. The company also does Webinars on topics such as ­operational compliance, target-date fund due diligence, and retirement-income solutions. Some clients sign up for the sessions, and others may become clients one day.

Helping educate sponsors includes not only legislative and legal issues, but also staying up-to-date on vendors, Kozemchak says—which vendors currently work well with plans and which do not, and new enhancements. “These are the ways to get traction,” he says. “It goes beyond being a general educator. Sharpen your skills to communicate successfully what is going on. Sponsors are looking for an opportunity to leverage other people’s expertise—the ability to drill down and tell them what they need to know.”

5. Become a sponsor’s problem-solver. Sources point to this as a second key to signing a new client successfully, a natural extension of educating sponsors about issues they face. “That is the only thing you are there for [with ­clients],” Cafaro says. “HR groups are usually half the size they were a few years ago. If you can become an extension of the HR group with no additional cost or minimal cost, you are adding value.”

When Cafaro has a second meeting with a potential new client, she focuses on offering ideas about how her company can help with the challenges discussed in the first meeting. “It is all about what issues they are facing, and the adviser’s solutions to those issues?” She finds that she can contribute the most when she focuses on plan design and helping plans match corporate strategies and retirement benefits more. She may identify plan-design opportunities to boost participation or reduce costs, for instance.

When considering a new adviser, employers “are looking for a high degree of comfort that you are going to take care of them,” Stone says. Calculating Sharpe ratios and the like does not differentiate advisers at this point, he says, since all advisers offer investment-analysis basics. Adding value for a new sponsor client could involve doing an operational-compliance review to correct errors, designing customized target-date funds to fit an employer’s population, or solving a testing issue in a 401(k) plan by setting up a nonqualified plan for highly compensated employees. “They are looking­ for a problem-solver,” he says. “Issuing a report on the investments every quarter is a core service, but it is not solving a problem.”

Kozemchak, who works primarily with plans that have more than $500 million in assets, likes to focus on his company’s ability to provide quality results for sponsors. So, he talks about specific payoffs at clients with similar situations, such as outcomes in the timing and execution of previous projects, the cost savings, the limited resources that the sponsor had to deploy to the project, and the quantifiable benefits that the sponsor felt the project added.

6. Keep focusing on existing clients. Kozemchak spends about 80% of his working time with existing clients, and the other 20% on efforts like speaking at conferences that can lead to new clients. Balancing time spent with existing clients and time spent cultivating new ones “is a perennial problem for smaller firms,” Stone says. “Larger firms typically have more resources, so it is less likely that a person at a larger firm is wearing as many hats as someone at a small firm. Larger firms typically have pretty good metrics on the number of relationships a particular role can handle, whereas that can be more fluid at a smaller firm.”

To help find balance, look for efficiencies in both areas. Cafaro says that, increasingly, automated reporting lets her allocate less time to doing routine tasks for existing clients and more time to talking with them. On the client cultivation end, her company recently has had more luck with outsourcing some cold-calling to make initial contacts.

Advisers have a strong business-development incentive to keep making sure existing clients get enough attention. “It takes a lot more hours to recruit a new client than to keep an existing one—by tenfold,” Carl says.