Complacency is a killer for any business. It’s especially prevalent in the 401k and defined contribution market.
Advisors and consultants often tap dance through the initial proposal process in an effort to demonstrate value, and service models are often implemented that may result in content, or even satisfied, clients.
However, 401k advisors inevitably get comfortable in the relationship over time, leaving the door open to competitors.
Poking holes in your service model
If the plan sponsor is happy with your service and their current record keeper, you might ask why disruption is necessary?
It’s a straightforward answer; in this day and age, providing the highest level of service and keeping plan sponsors happy is simply not enough.
Sure, some clients will be less receptive to alternatives if they’re satisfied with your relationship, yet good service is little more than table stakes in today’s business environment.
Let’s examine some disruption examples:
You have an existing client of five-plus years. They’re satisfied with their current administrator and, generally speaking, there is a clear relationship between client tenure and the susceptibility of competitive disruption.
While it may seem counter-intuitive, plans that have been with the same advisor for longer periods of time are often in legacy platforms or in fee structures that are no longer in alignment with their needs.
These plans need to be refreshed to bring them up to speed with the evolution of the defined contribution business. While they may be perfectly happy with their existing systems, due diligence process and relationship, the fact is, long-term client relationships are often in desperate need of an RFP.
As the plan advisor you have two options: One, you keep the status quo. After all, the client is perfectly satisfied, and you are doing good work for them.
Alternatively, you could examine your client relationship through a different lens and ask yourself, “What holes would you poke in the existing services and fee structure you currently provide? What pain points would you highlight if you were trying to win this business from yourself?
From an examination of the plan design to an evaluation of fees, chances are that there are some significant improvements to be made.
Next, there’s the all too common situation where the swelling of plan assets means another administrator can offer a more cost-effective structure, leading to a re-examination of your own fee structure.
Fee compression is real, and technology is only going to accelerate the process. Why wait for a competitor to reduce your client’s costs by 10 to 20 percent when you can do it yourself?
Nothing builds trust more than demonstrating that you’re truly serving as their advocate and placing their needs above anything else.
Systematizing change
Enhancing retirement plans for existing clients often requires change, a process that can be difficult. It’s what really leads plan advisors to avoid initiating major changes with clients in the first place.
However, developing a systematic process for managing change can help.
First, begin with clear communication that properly sets expectations with your client. Consider “holding their hand” through the process in the same way you did when your relationship began.
Next, be sure that any recommended alternatives truly deliver the services and fee structure the client needs. The worst thing an advisor can do is to suggest a major change, have it backfire, and end up with an unhappy client. Over-deliver and you may even find yourself with a more satisfied client.
Instead of utilizing the typical SWOT analysis, drop the S and focus on a WOT analysis. By this, we mean examining (W)eaknesses in your services, (O)pportunities for improvement and (T)hreats from competitors. Doing so may help to identify strategies to improve your service model, safeguard your business from competitors and ultimately deepen the relationships you have with your clients for years to come.
Kurt J. Rossi, MBA, CFP, CRPC, AIF is the CEO of Independent Wealth Management in Wall, New Jersey, financial columnist, blogger and industry expert. He can be reached for questions at 732-280-7550,kurt.rossi@Independentwm.com, www.bringyourfinancestolife.com and www.Independentwm.com.