Ever wondered what the best techniques are to convert a 401(k) prospect to a client?
Many 401(k) sponsors meet with multiple firms before they choose an advisor of record. What will separate you from all the other “also rans” that might charge lower fees? What are the surest ways to make an impression and walk away with a new account?
According to Fidelity’s “2015 Plan Sponsor Attitudes Survey,” the satisfaction level of plan sponsors with their advisors improved to 70 percent this year, reflecting a steady rise from 2010, when it was just 57 percent. However, they also found that 17 percent of respondents are actively looking to switch advisors, which is the highest number since the survey was launched six years ago.
Translation: the opportunities are there, but how do you become the advisor of record with the high satisfaction rate? We interviewed several top advisors to gain their insight on what turns a prospect into a client.
Foresight Wealth Management works with a host of clients that range from start-ups to plans with $60 million in assets. Managing partner Adam Nugent, AIF, feels that it is a combination of factors that convert a prospect into a client, but there are also personality- and experience-driven aspects that vary in each case.
“Certainly fees and the services that we will provide are important, but we like to paint the picture of how it will be for them to be our client, down to what their web portal might look like,” he says. “We also work hard on making a connection with them because if we work together, they need to like us and vice versa. If your personalities jive in initial meetings, that can help establish trust down the line.”
Another key component for Nugent is having corresponding testimonials from current clients who can speak the language of the prospect.
“We always have clients who are ready to talk about the positive experiences they have had with our firm and we offer these up proactively in initial meetings with plan sponsors. We match up the clients we have with the prospects based on shared industries and company size whenever possible. This helps personalize our presentation even more and seems to resonate with prospective clients,” notes Nugent.
Many referrals for potential 401(k) plan clients come from relationships that have been developed with law and CPA firms which Nugent says gives his firm a strong endorsement walking in the door to meet with a prospect.
Foresight is able to be “product agnostic” due to the independent nature of its business model. Nugent notes that this allows the potential client to buy in to them as a partner and not focus on particular product offerings. “For us it’s about creating an experience. There’s a reason people want to buy an Apple product at the Apple Store versus at Target…the product is almost secondary to the experience you are given.”
Greg Bakke, president and CTO of Denver-based Expand Financial, LLC approaches the prospect-to-client conversion process a bit differently, with a distinct nod to his data-driven technology background. “We aren’t competing on ‘nicer, smarter and better’. We take very complicated matters and simplify things for them. We help them visualize what our partnership will look like,” he says.
Bakke describes his firm’s “secret sauce” as a four-pronged approach that is equal parts objective and subjective.
“One of the first steps for us is to get a hold of as much information as we can from a prospective client,” says Bakke. “We will dissect the current fees they are paying and create an objective side-by-side comparison with industry benchmarks. If we tell them they are currently at 150 basis points for the all-in cost, it means nothing. But once we put that in a marketplace benchmark format, they now have prowess over the fees.”
Then Bakke and his team will do a thorough analysis of their current investment approach and create a detailed output that shows them what is–and what is not–working.
These steps are critical according to Bakke because “most plan sponsors are overwhelmed with the data they regularly receive so we take what they give us and make it easily understandable and comparable.”
From there, they discuss how well the current plan design is meeting the needs of the ownership group and sponsors of plan. Lastly, Bakke feels it’s important for the plan sponsor to understand their fiduciary liability and corresponding responsibilities under ERISA.
“We present ourselves as their outsourced retirement partner and trusted ERISA expert. Their eyes light up at the potential of us taking on the management of the regulatory burden.”
Bakke says that his firm eagerly adopts – and automates – new or pending regulatory requirements. This upfront handling of information and data is also a selling point because it helps earn the trust of prospective clients in a short period of time according to Bakke.
Rick Meyeres, AIF, CRPC, CRPS echoes the need to be ahead of regulatory mandates. As president and CEO of Retirement Benefit Partners, he has recognized that regulatory changes are a constant and that it’s important to not get caught reacting. “You must have a plan and strategy before it comes into play. If you wait for regulatory change to happen, it will be too late,” an approach that is appealing to prospects.
This level of preparation is what Meyeres also takes into initial meetings with prospective clients. He and his team look into the plans very carefully and “in most cases, I have more information about their plan and provider than they do.” He is matter of fact about his strategy. “Information is king and whoever has the most will be the most successful.”
Meyeres feels that it is also important to attempt to fix the problem instead always assuming that the answer is for the plan sponsor to find another provider. Often he says the issue is that the existing advisor isn’t taking care of the plan. Or there’s a lack of education or the investment lineup is not competitive.
This coincides with findings by 401khelpcenter.com, which noted that employers change 401(k) providers for one of the following reasons:
- They are dissatisfied with performance of the current investments
- They are dissatisfied with the current record keeper’s services and/or fees
- Their current service provider leaves the business
- The company is sold and employees switch to the new company’s plan
- The provider resigns from handling the company’s business.
Bakke adds that his top questions for plan sponsors are simple. “Is the current plan working for them? Is it an operational burden? Are you being properly taken care of by their current advisor? I prefer to start a step back from fees and investment strategies and ask how they are being supported.”
The advisors we spoke also point to a growing trend in the need to specialize in retirement plan advising.
Meyeres says that “most advisors walk in and try to pitch a product which is an old model.” He cautions advisors not to “dabble in qualified plans. You need to specialize in qualified plans or partner with somebody who does.”
In the 2014 edition of Fidelity’s Plan Sponsor Attitudes report, almost half of plan sponsors surveyed said the need for more retirement plan expertise was the primary reason behind a switch in advisors. Additionally, the Retirement Advisor Council estimates that 75 percent of plans between $5 million to $500 million do not use an advisor who specializes in retirement plans.
However, Bakke thinks that it’s somewhat unreasonable for advisors to specialize in this space. But what he sees is that advisors are aligning with specialist firms that give them the necessary depth. In doing so, the advisor that is more experienced in personal wealth management can add tremendous value to participants and the investment committee in areas they are already comfortable – whether it’s investment management and personal investment strategy/planning.
The Department of Labor (DOL) light continues to shine very brightly on fiduciary responsibilities and this creates another opportunity for advisors to distinguish themselves with prospective clients according to Meyeres.
“You have to educate and train clients on what the fiduciary requirements are as well as what their responsibility is in this space. Their liability has been pushed more to the front than ever before. I’m not in favor of allowing brokers to work in the space without proper designations and fiduciary training.”
He recommends that advisors gain additional expertise from organizations such as fi360, which offers fiduciary education and certification programs.
Nugent believes that Foresight’s fiduciary story is unique and sets them apart from other firms, especially with anticipated regulatory changes. “If the proposed DOL changes go into effect, everyone will need to be a fiduciary which will mean a significant shift in the current marketplace. I think the number of advisors will diminish and those firms that focus on fiduciary and fee-based services will be positioned to take market share.”
The complex and often confusing landscape of 401 (k) plans makes an advisor’s job cut and dry in Meyeres’ opinion.
“The unknown is what bothers clients the most. So the more transparent you can be, the more you disclose, the better. This approach also means I can lie my head down at night and not worry.”
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.
Great information u gave me plenty to consider thanks I need to ramp up.