Coming Out of the Cold (Call)

“If you don’t prospect, it doesn’t matter how smart you are or how many designations you have,” says Maribeth Kuzmeski, President of the Libertyville, Illinois-based Red Zone Marketing, which specializes in adviser marketing. “There is no business if you don’t have people coming through that door.”  

Unfortunately, for many advisers, trolling for new clients is much easier said than done. It can be challenging to identify likely prospects, approach them confidently but not overaggressively, and get them to see that they and their plans desperately need what the adviser offers.  

However, one thing is clear, according to the experts: Simply picking up the phone and calling a prospect out of the blue—cold calling—usually does not pay off.  

“I do find it’s a waste of energy when you’re going to get a one-in-five close ratio,” says adviser Todd Lacey, President of the Athens, Georgia-based The (k)larity Group, a member firm of NRP. “It’s not worth my time.” Also, clients reaped from a cold call may take a while to lock up, “unless you get lucky,” says Lacey, noting it could be up to two years in some cases because of the length of time required to get in front of the right people at that firm.  

 “Cold calling is a waste,” agrees veteran adviser Barbara Delaney, President of FFoA of Pearl River, New York, a member firm of National Retirement Partners, agrees. “You have to figure out ways to get in to see the prospect without cold calling.” 

Leveraging Existing Contacts 

A good place to start is one of the oldest business tricks in the book: Work existing networks as hard as you can.

Lacey suggests less experienced advisers can mine relationships with “centers of influence” such as CPA firms, third-party administrators (TPAs), or benefits brokers who might handle health but not pension issues and who are likely to know about potential clients with plan problems. 

Another approach Lacey suggests is to learn when employees might be gathering for another type of meeting, and get in front of them there. For example, the accounting profession carries continuing education requirements that might lead to a time that an adviser could find a bunch of CPAs in one place who might have gathered for their CE classes. If an adviser is aware of this, he should take advantage of a good relationship with management to get on the education agenda so he can present to the assembled professionals.  

Delaney adds to the list Chambers of Commerce and Rotary Clubs—at least for advisers with local clients. “[Prospects] want someone who cares not only about themselves, but also their community,” she asserts.  

Best of all, Kuzmeski insists, ask a satisfied customer if you can use that person’s name when asking for an appointment. An adviser can hit the mother lode of referrals if he or she is lucky enough to have as a client a plan sponsor with his or her own built-in network.  

“If you get a referral, you’re going to get into the office,” Kuzmeski says. “Referrals are the best way. Some clients are great sources of referrals: People say: “He knows everyone!”” 

One sticky issue, though: An adviser has to work out a compensation agreement to help make sure the client referral source stays active. “They tend to be more motivated if they know they are getting paid,” Lacey admits. Determining the payment can be complicated, however. If a referral source has the appropriate license(s) for the type of service/product an adviser offers, Lacey says, that adviser typically can share revenue in the form of a solicitor fee (a one-time, up-front payment for the referral) or a split of the ongoing revenue. If the referral source does not have the appropriate licenses, “then it gets a little tougher,” Lacey says, explaining that the broker/dealer or RIA involved will tell the adviser how and what they can pay. 

Lacey says one option that is generally available in this circumstance is a solicitor fee that is not tied to assets and not tied to whether the adviser walks away with the sale.  

Next Steps 

Once an adviser has identified a potential client and sets up an initial meeting, Lacey recommends asking a series of questions that could include: Do you have an investment policy statement? Does your investment committee meet regularly? What are your participation and deferral rates? 

 If he gets a “no” to the investment policy inquiry, Lacey says, “that tells me they’re probably not managing your fiduciary responsibilities very well.“ It’s not a thought Lacey would share directly with the prospect. “I do my best not to criticize how a prospective client has been handling their plan,” he says. “Instead, I let them know that most plan sponsors do not understand their fiduciary responsibilities and, as a result, are ill-equipped to manage their plans effectively. This is the main reason that they need to hire a qualified adviser to help them through the process.” 

Lacey said he typically will conduct a preliminary introductory meeting with a prospect before getting into potential plan problems. “I think that you have to be careful about asking too many questions before a prospect has had the chance to meet you and understand why you are asking for the things that you are,” he explains. “I think that you need to demonstrate your knowledge and potential value first, and then describe the process of how you get to know a plan to see specifically where value can be added. Every prospect should feel like your solution is truly customized and not an off-the-shelf, one-size-fits-all package.” 

A prospecting adviser also could inquire about whether the client has been visited by the existing adviser recently to prepare for the year-end or open-enrollment period, and whether they or planning communication for the latest round of increases in contribution and deferral limits. According to Lacey, plan design and education issues are the two best ways to create calendar urgency in the 401(k) business.  

However—and this is important—make sure not to overload the decisionmakers with too much data. “More often than not,’ Lacey points out, “they come away confused and nothing ever happens.”  

One way to avoid dumping too much on the prospect is for the adviser to couch the presentation in terms of actions taken for other clients. “That’s a little softer approach,’ Lacey asserts. “You’re still selling but in a softer, more conversational way.” 

After a little intelligence gathering, the prospecting adviser can volunteer to do a plan review even if that sometimes means the work eventually is given to another adviser. “The goal would be that they would engage you because you’ve identified all their (plan) issues,” Lacey says. “The risk is more than worth it in my opinion.”  

Kuzmeski cautioned that the prospecting adviser particularly needs to steer clear of directly bad-mouthing the existing adviser—particularly if the decisionmaker across the table made the original adviser hiring decision. “If you say “I know you have a current adviser, but we’re better,” you’re never going to get there,” she says.  

The trick: Focus on what the presenting adviser can do well and not necessarily what the existing person is performing badly. “It’s better if you get them to see what you have,” Kuzmeski says. “You have to lead them to a conclusion, not tell them.”  

Time Management 

Given the importance of prospecting, then, how much time should an adviser spend on it? 

Experts say that depends on the person’s experience level and the size of his book of business. Just starting out with a thin client list? Eighty percent of your time should be devoted to looking for new business and the rest to servicing current clients, says Kuzmeski.  

However, advisers agreed with Kuzmeski’s explanation that, as time goes on, that ratio eventually will flip to where an adviser spends most of the time on client service and only about 20% looking for additional work.  

Keep in mind that even time not spent directly prospecting can also have its own a payout in terms of generating new business; there are few better prospecting tools than a satisfied client who then talks about the adviser to all of his or her business contacts.  

“You want to start off strong out of the box and get new clients, and those new clients can be avenues of referrals to you,” Kuzmeski declares.  

Questions To Ask a Prospect 

• Do you have an investment policy statement? 
• Do you have an investment committee—and does it meet regularly? 
• What are your participation and deferral rates? 
• When did you last meet with your adviser?  
• Did you know that the IRS has changed some of the contribution limits on 401(k)s?  
• Are you planning communication for the latest round of increases in contribution and deferral limits? 
• What do employees like best or dislike the most about your plan? 
• About how much do you contribute to the plan each year? 
• If you decide to make a change, what about your current plan do you not want to change? 
• What are your concerns about making a plan change? 

Places To Mine for Prospect Names 

• CPA Firms 
• Chambers of Commerce 
• TPAs 
• Rotary Clubs  
• Benefits Brokers 
• Current Clients  

5 Common Prospecting Errors 

1. Wasting time with prospects who offer little chance of success. 
2. Not effectively demonstrating the financial professional’s potential value to the employer and the participants. 
3. Trying to sell a product or service without first having a complete understanding of the client’s needs. 
4. Overwhelming the prospect with a whole menu of products or services instead of focusing on specific solutions to the prospect’s plan problems.  
5. Not providing follow-up client service after winning the business.  

Source: “To Sell or Not to Sell…Employer Retirement Plans,’ Tom Foster, Todd D. Thompson, The Hartford’s Retirement Plans Group