Bees to Honey
When you are just starting out, you may be thinking land-grab. Scoop up clients, period—with little thought about who you are best-suited to serve and why. While that may seem ideal to get your business going, think again.
“It’s a mistake to go after a market without seeking first to understand whether or not that market is attractive to you. Not all clients are created equal, and not all clients value the same things,” says Stacey Haefele, President and CEO of HNW, Inc., and HNW Software, Inc., in New York City, a marketing firm specializing in the wealth market. “Your mother was right: If you try to be all things to all people, mediocrity inevitably results. Market leaders—truly successful businesses—always choose,” she adds.
You need a target market. In the words of George Harrison, “If you don’t know where you’re going, any road will take you there.” Without a target market, you have no idea how to make the most efficient use of finite resources—and resources are always finite, be it time, money, or people. Focus is the heart of delivering breakthrough value. By focusing on a target market, you can hone your message to exactly what the market values. “This mere act of focus increases the likelihood of conversion—improving your return on investment on marketing efforts. Who wouldn’t want that?” Haefele asks.
“Decide who you want to serve and why you want to serve them. Serving any plan will force you to spend too much time on the clients you do not want, instead of building a strategic, scalable business built of clients who fit a certain profile,” says Michael Rosenberg, Senior Vice President of IODC (Investment-Only Defined Contribution) Distribution for Prudential Investments, in Newark, New Jersey. “Say, maybe, you decide you want to focus on serving manufacturing businesses, for example. Pick a market based on your beliefs and background. Whatever your past may bring you, you can find something that fits you as a person and people you could help.”
What are your goals and objectives? If you do not have a passion for the type of business you are trying to attract and have not made a realistic assessment of your qualifications, abilities, and resources to acquire and service what you are after, you can quickly find the business you just landed is a nightmare. “The likelihood of subsequent loss of the piece of business is then greater,” adds Karl Kunkle, who is in charge of the Schneider Downs Retirement Plan Solutions’s employee benefits practice and co-manages its wealth management practice in Pittsburgh.
Ready, Set, Aim
The big question, then, is who to target and how to target? The choice of a target market is by definition an inside-out and outside-in exploration.
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Explore and define your own unique value. What can your practice uniquely do? What is your strength? Is it investing, analysis, ERISA (Employee Retirement Income Security Act), or taxes? What are your weaknesses? What are your specialties and what are the specialties of your team? Can you act as a fiduciary? Can you recruit and train staff to handle large-scale clients? Are you willing to travel? Answers to such questions will help determine which markets you can approach, says John Carl, President, Retirement Learning Center in Brainerd, Minnesota. Then look from the outside-in: Are there enough of your ideal clients in the marketplace to support your business model? What type of revenue will they generate? Of much importance, how much time and effort will be needed to get that revenue? “Is each plan worth your time?” asks Lawrence Davis, Vice President of Diversified Financial Consultants in Bellmore, New York. It can take at least six to 12 months to be hired as an adviser to a retirement plan. It is a bogged-down process, Davis says. The conversion process is slow. If an adviser sat down with someone in June, it could be at least the end of the year, if not longer, before they would actually become a client, he explains.
Understand the needs of various types and sizes of retirement plans. For example, defined benefit and cash balance/hybrid plans require a much better understanding of the pension regulations. Do a reality check. Which markets are likely to create compliance and administrative headaches? A smaller company may not have a full-time human resources person, which means there will be more work on your part for a small-plan client that is likely generating less revenue, says Dennis Lynch, Principal and Chief Compliance Officer at Ipswich Bay Advisors in Danvers, Massachusetts. He says to ask yourself if you would be okay with that.
An adviser often can provide poor service or invest too much time attempting to deliver services he should not have committed to. “These failures can lead to either an unhappy or an unprofitable client relationship,” says Lynch.
An adviser cannot properly handle plans of all sizes. “An adviser who is advising $50 million plans cannot effectively advise start-ups because of the work involved. Also, if you work on start-ups, you don’t have the same background to effectively advise a plan with thousands of participants around the country,” says Ary Rosenbaum, an ERISA attorney with The Rosenbaum Law Firm in Garden City, New York.
Go with what you know. In determining a target market, look to areas where you have an affinity. For example, if you were a former school teacher, you may want to focus on 403(b) plans/school systems. “My partner worked for a TDA [third-party administrator] for 10 years and administered 20 ESOP plans. Therefore, we have marketed successfully to ESOP companies that have large 401(k) plans. We are one of the few 401(k) advisers that truly understand how ESOPs work, the culture of those companies, and how the ESOP and the 401(k) interrelate at the employer and employee level. These ESOP companies are some of our best clients and appreciate the value of our services,” says Daniel Boardman, Certified Financial Planner, Registered Representative, Hickok & Boardman Retirement Solutions in Burlington, Vermont. Another adviser’s father was a doctor, and familiarity with the physician community prompted him to pursue doctors. Quite simply, advises Carl, “Find your niche and stay there.”
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Create a story. When you define your niche, you will begin to create a story and a process to serve specific clients. By having a sales story and a target market, you can clearly explain to plan sponsors why you can best serve their business. Focusing makes you more impassioned in your approach, points out Rosenberg.
Find balance. Taking on too many markets or being too narrowly focused can prove futile. You can spin your wheels selling to too small a market, and you will not get a big enough bang for your buck, says Warren Ingersoll, Manager, Qualified Retirement Plan Sales with the Creative Financial Group in Newtown Square, Pennsylvania.
Be broad, but specific. “We typically have six to eight target markets per adviser,” says Amine Rizk, Certified Financial Planner with AXA Advisors in Dallas. You won’t go far off course when targeting your market, says Kunkle, if you think: plentiful, accessible, profitable, sustainable, scalable.
Hit Your Target
Once you know who you want to go after, it is time to muscle up your marketing machine. How to get those ideal clients? If you are targeting a particular industry, attend conventions in that industry, write articles for the industry’s trade publications, and network with executives. “If your advantage is your ability to reduce the plan expenses, then present discussions about the cost and complexity of plan expenses. In short, reach out to your prospect where he/she is and position yourself to highlight your strengths,” says Louis Harvey, President and CEO of Dalbar in Boston.
Consider doing an e-newsletter on a topic relevant to your target market. “We also belong to human resources groups, associations, and industry groups in our target market. We go where CFOs go,” says Boardman.
Use time wisely. What can be a waste of time? “Cold calling won’t get you anywhere,” says Ingersoll. Similarly, thinking in generalizations instead of specializations can be a loser. “General advertising in a paper is a waste of advertising dollars. If you don’t reach the right target, you’ll get a lot of calls from plans that don’t fit you or aren’t profitable. Take the rifle instead of the shot gun approach,” says Boardman.
Do your research. There are many tools to help you find prospects. Rosenbaum recommends FreeErisa.com. You can search more than one million form 5500 benefit filings; narrow your search by company name, state, or zip code; search by companies with potential rollovers; look up nonqualified deferred compensation plans; and search on plan type, total assets, and total participants. Other favorites of his include Brightscope.com, Larkspur, Judy Diamond, and Fiduciary Network, a wealth management firm that can help you in your marketing efforts.
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Find common ground with other advisers or strategic partners. Is there a commonality you can leverage? For example, can you network and add value to the CPA community? Or should you team up with benefits experts like property and casualty insurers who don’t have retirement experience, or if you have relationships with not-for-profits?” asks Carl.
Develop a plan. Just like in all aspects of your business, you need a plan; a detailed step-by-step process starting with the continual generation of vetted prospects leading to the on-boarding of new clients.
Know that there is no single best marketing approach that will reach every prospect in your target market. “Fortunately, the IRS and Department of Labor change the rules for retirement plans frequently. There is always some new rule or amendment that a retirement plan prospect may need your help understanding. Become a valuable resource for this information; consider making it the topic of a seminar,” suggests Lynch.
The key, says Haefele, is to turn your attention to channels. Now that you know who you want to target, what they uniquely value and how you can uniquely service them, focus on where they are. Develop a mix of messaging and communications that can show up where they are. One of the most important things that is often forgotten (perhaps because it is not easy) is measurement. “Marketing is not a broadcast. It’s a dialogue. You should be measuring every interaction in the marketing mix to learn not only what works and doesn’t, but why. Wash, rinse, repeat. Marketing is not a one-time event. It’s a process of knowing yourself, knowing your clients—and getting better with every interaction,” says Haefele. One of the best ways to measure return on interaction is through e-mail publishing. By sending clients a monthly e-newsletter, for example, an adviser can get rich metrics on client interest and activity via measures such as open rates, story click-through rates, even by tracking what is downloaded or forwarded to a friend. By putting targeted, actionable content in the e-mail channel, it is a window into client interests that can give an adviser more insight into client needs.
In the end, the best target market is the one you really love. As Ingersoll says, “If you don’t have passion, don’t go there.”