The Value of Difference

Most retirement plan financial service professionals have an established sales process to which they adhere when prospecting, selling, and closing business. It would be rare for any two firms to design and implement their respective sales processes in exactly the same manner.

However, regardless of differences, incorporated in any sales process should always be a question of “What does the client need?”

Is the CFO clamoring for open architecture? Is the human resources executive searching for an adviser who will meet with and advise plan participants individually? Does the CEO have an interest in incorporating insurance-based product within the plan (which is the reason he is requesting it)?

As a part of answering these questions, financial services professionals must show why they are the best to serve the client. Undoubtedly, an adviser’s business model will have a bearing on his resulting services. Normally, in addressing this topic, the questions from the CFO, human resources executives, or CEO might gravitate toward:

• Will a registered representative deliver the best service model for this plan?
• Does the registered investment adviser (RIA) solution appear appropriate for the plan participants?
• Can an insurance agent provide what the plan sponsor is describing?
• Would a bank trust department provide the asset security that the Treasurer demands?
• One or more of the above business models may be in a position to deliver a satisfactory solution that fits the needs of a particular client. Which one?
  

What Is Needed?

We all have heard the traditional arguments made by financial services professionals in support of their particular business models: The RIA can serve as a fiduciary; the registered representative first makes an assessment of suitability before investments are made; the bank trust department model employs a third-party custodian, thereby delivering an additional safeguard; and insurance products provide protection that others cannot.

It is important that you believe in your model and why it has value, but I ask you to consider the broader perspective before you negate the value of your competitors.

Look beyond the client—and consider the position of the financial service professional. If every financial professional in business today were to convert to your model (be it registered representative, RIA, trust department, or Insurance), what would occur in our industry?

Viewing Another’s Process as Valuable

Most are aware of the distinction between suitability vis-à-vis fiduciary standard of care. There is an equally large distinction between how a bank addresses risk compared with an insurance company. Given identical exposure, the methodology of “how to treat” such an exposure varies by industry. Banks historically have sought to mitigate and, if possible, avoid risk, whereas insurance companies are comfortable accepting and managing risk. Neither the bank nor the insurance company is wrong, but their practices are different.

As much as we each profess the virtues of how we have chosen to do business, would you really want all of your competition to morph to your business model?

How would you (and your business) fare if all financial services representatives were to utilize the exact same model—and be governed by the same regulator? Would you enjoy competing with folks who act, look, and sound exactly like you? If you were assured that none of your colleagues in the retirement plan business was going to improve upon your good business model, how much time and effort would you spend trying to improve your model or product? How would you differentiate yourself?

Other than being extraordinarily boring, consider what is lost if all are led to conduct retirement plan business with a common and limited product offering in a homogeneous world.

If that is a scenario that you are comfortable with, tell me please, from where do process improvements emanate? We are all better because of each other. Ultimately, the client and plan participants are the beneficiaries of our competition.

Steff C. Chalk is CEO of the Fiduciary Consulting Group, a fee-only fiduciary consulting practice serving corporations and nonprofits. A judge for the PLANSPONSOR Retirement Plan Adviser of the Year award, and a faculty member of the PLANSPONSOR Institute, he is also the co-author of How to Build a Successful 401(k) and Retirement Plan Advisory Business.