Building Strategic Partnerships
Art by Marc Rosenthal
Jim Sampson understands the value of strategic partnerships. He recalls how, early in his career as a wholesaler in the pension plan industry, he observed those relationships in action: Advisers who serviced the most plans had “some kind of partnership in place” with other professionals such as Certified Public Accounting (CPA) firms or benefits consultants, says Sampson, now director, retirement advisory services, with Hilb Group Retirement Services in Cranston, Rhode Island. He adopted that approach when he shifted to plan advising in 2003, and it still works, he says. “I haven’t made a cold call in 18 years.”
Referrals from other professionals are the gold standard for landing new accounts. The client trusts the other professional’s judgment sufficiently to ask for a referral, and then having that common acquaintance as a shared contact helps the transition when forming a new working relationship.
Randy Long, CEO of SageView Advisory Group, headquartered in Irvine, California, says he “continues to enjoy strong relationships with strategic partners.” These include recordkeepers, ERISA [Employee Retirement Income Security Act] attorneys, third-party administrators (TPAs) and accounting firms. “They are big sources of new business,” Long says.
Looking across the industry landscape, Long says he believes that the consolidation that has taken place among recordkeepers and, in particular, advisers, has played to SageView’s strengths as an aggregator. “It’s harder for advisers to operate as solo practices,” Long says. “Today, it takes a lot more resources and a true team effort.”
Developing strategic partners that can provide quality referrals takes time, though, and it is not a one-way street. PLANADVISER asked several retirement plan consultants for their suggestions on how to grow solid partnerships.
Align Your Markets
“It typically takes time to build these relationships before they refer us in,” says Steve Wilt, principal and financial adviser with CAPTRUST in Akron, Ohio. During that time, the CAPTRUST team and potential partners get to know each other. “We’re learning about their firm and how we might be able to reciprocate with opportunities,” Wilt explains. “Who’s their ideal client? What should we be asking in the marketplace to identify someone that would be a good client for them?”
At the same time, Wilt educates the potential centers of influence about CAPTRUST’s model client. His team’s practice focuses on northeast Ohio, Wilt says, and his goal is to work with companies that are within a one-hour drive of Akron. A professional firm servicing the same locale is a good candidate for a strategic relationship, he says.
Wilt cites the example of working with retirement plan auditors. He looks for firms with extensive audit experience versus CPA firms that provide audits just occasionally. That criterion, combined with the geographic requirement of staying in northeast Ohio, results in a short list of candidates. Even if Wilt’s team has not worked with a particular audit firm, he says, it is a “small market,” and the organizations are apt to be familiar with each other.
Seek Complementary Expertise
Plan advisers working in market niches can benefit from matching their expertise with strategic partners’. Sean Patton, a partner and senior consultant at Westminster Consulting in Rochester, New York, says his firm has foreign companies, not-for-profit hospitals and retailers among its clients. Thus, he seeks to work with benefits attorneys, for example, who have experience in those business lines.
The recognition of expertise is mutual, he adds. “It’s good to work with those who understand the unique challenges and who recognize that you may have an expertise in those lines that may be different from another person they may refer business to.”
Avoid Bad Fits
It might be tempting to accept any referral you can get, but Sampson discourages that response. “If you say you’ll take anything, you’re going to get anything,” he cautions. “And you’re probably going to get referrals to clients that aren’t in your sweet spot or aren’t your target market. Your target markets really need to be aligned because if they’re not, somebody will be on the short end of the deal, and that’s when it ends up blowing up.”
Sampson also stresses the need to establish guidelines for a strategic partnership upfront. For example, in his experience, advisers typically receive many more referrals than they can make to other firms. If a prospective partner wants a quid pro quo arrangement, that should be discussed in advance. “If you can deliver on that, then that works for everybody, but it’s not always the case,” Sampson warns.
Wilt cites an instance in which an ERISA attorney approached him about partnering, but Wilt ultimately decided to decline the opportunity.
“The attorney was much more about building his business and not as much about helping the clients,” says Wilt. “And I got a sense that if I were to send one of my clients to them …, I just wasn’t comfortable with it. So, when it doesn’t fit, you just gotta walk away.”
Understand Expectations
Strategic partners also bring expectations to the relationship. Patton believes that plan advisers “must bring something to the table” says he thinks being in the business. That could be delivering outstanding client service—making professional partners confident their clients will have a good experience, he says he has found. Another option is to provide unique expertise. Patton says his firm has extensive experience with defined benefit (DB) plans and he believes that is a competitive edge in developing relationships. “This DB expertise we have is unique,” he says. “Most of our peers don’t have a consulting actuary on their team. They can’t talk strategically about a defined benefit plan and how to get from where they are to what the desired end state is.”
In Wilt’s experience, very few partners “keep score” and expect an equal number of returned referrals, but he agrees that delivering reliable service is essential for developing and maintaining these relationships. “Most of the folks we find that are good, long-term partners, they’re looking for someone who’s going to benefit their client first,” says Wilt.
Be Realistic
Referrals from strategic partners are a great way to grow your practice, but for most firms those are just one part of a business development plan. This is for several reasons. First, even if a partner wants to refer a client to you, it might be constrained from doing so. Sampson cites the small likelihood of getting a referral from a recordkeeper. “Most recordkeepers get their referrals from advisers,” he says. “So it becomes difficult for the recordkeeper to make a referral to me, because if it’s referring a client to me, that means it’s taking it away from an adviser who probably brought in the business. And that’s not good business practice.”
A second reason is the difficulty of managing numerous referral partners when you have a finite number of clients. Patton has found it “gets uncomfortable and awkward” to have a “huge array” of referring sources and partners, because of the risk of conflicts in the relationships. He says a better approach is to work with a smaller number of relationships that align from a business perspective, and a personality perspective.