Peter Drucker said, “Efficiency is doing better what is already being done.” So how can 401(k) advisors take their practice to the next level by adjusting how they think about efficiency, repeatability, scalability, and how they all can drive greater profitability?
It was the focus of Craig Rosenthal’s virtual presentation recently at the Excel 401(k) 2020 Digital Series.
Rosenthal’s, SVP, Advisor Sales, Service and Marketing with Fiduciary Benchmarks began by rhetorically wondering where new revenue and improved profitability come from when everyone is distracted by world events.
“Let’s not forget how difficult it is to be a retirement plan advisor,” he said. “Whether it’s fee compression, consolidation, regulation, technology and more, all of these things are fighting for your attention while you’re trying to keep an eye on building a better practice.”
Add in the fact that the cost of business is going up and there are pressures to lower the advisor’s core source of revenue, “and the only answer I can think of is you have to tweak the way you think about how you run your practice.”
Rosenthal listed four key challenges, and because “All problems and no solutions make me a dull boy,” he thankfully offered solutions.
Efficiency: The challenge
Efficiency is the power to achieve more by doing less.
“How realistic is this when you walk into an office every day and are faced, at a minimum, with the following—phone calls, emails, a CRM system to log those call and emails, Microsoft office to build reports to respond to inquiries, and that’s even before we get into individual tools to support your clients?” he noted.
Two key levers to adjust in order to “get to the right place” are time and people.
“Your time is valuable, and therefore what are your time wasters? Any repetitive tasks that aren’t beneficial,” Rosenthal explained. “How many different data sources must you log into every day? How many clicks does it take to get the needed information? Is your team manually retyping information into another tool?”
Ultimately, he said, more human interaction means more potential for error and higher costs, which negatively affect profitability.
Repeatability: The challenge
“The more you repeat something, the better you become at it,” he said. “And the better you become at it, the more likely you become more efficient. Becoming more efficient means more potential to be profitable.”
Apply this logic across a base of plans and adding more plans to the mix only becomes easier, and it can be achieved with little to no extra cost because the processes are repeatable.
Scalability: The challenge
Adding people to a project at a late stage only delays the project. How do you, therefore, scale without adding people?
“A relevant example would be an annual plan review that takes 25 hours to create and is priced at $2500,” Rosenthal explained. It roughly equates to $100 an hour.”
Through repeatability and tinkering with scale, it might be taken down to 10 hours, and that same annual review is generating $250 an hour.
“In addition,” he added, “You have 15 more hours to apply to more or different clients.”
Profitability: The challenge
He provided a simple equation—fee compression and rising costs equal eroding margins.
Efficiency: The solution
Advisors don’t like administrative and operational tasks; they enjoy working with plan sponsors and participants.
“You need tools to free you up to do that. If the tools can give you a CEO level, on-demand view of the scale and growth of the practice, and you can analytics are available at your fingertips, that is the secret sauce to take your practice to the next level.”
Repeatability: The solution
Some clients are different and special and must be treated as such, but at the end of the day, most advisors have two or three business models to support clients.
“Call them whatever you want but build them so they are repeatable and make the one-offs a lesser part of your business,” Rosenthal said. “Tiered service models are the answer and more A client and less C clients will result.”
Scalability: The solution
Salesforce is often touted as the most robust CRM, but the most robust CRM is not the best CRM for a cost-conscious, consultant-averse small business. There are smaller, smarter alternatives to something like a Salesforce that could be a better fit.
“The more information you have, the easier it is to scale because you will be able to do more with less,” he argued. “Getting away from huge systems that aren’t focused on what you do on a daily basis is something to focus on.”
Profitability: The solution
Lastly, Rosenthal advises attendees to have all data and tools in one place (dashboard).
“Wrap them in automated workflows,” he concluded. “Do that and practice efficiency will increase, as will repeatability and scale. It will positively impact the bottom line and make you more profitable.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
