SooJin Chun Buzelli Creative Director Portfolio, part 2
sbuzelli@mac.com
cover story
26 | planadviser
Singing
Praises your
Marketing your firm means more than just bringing in clients When the word marketing comes to mind, do you equate it with prospecting? Prospecting is only part of marketing your firm, says Shirley Hanson, a Principal at Hanson Marketing Group in Philadelphia, Pennsylvania, which offers marketing plan services to financial advisers. Delivering a consistent message about your firm across all channels—the community, prospects, and current clients—is critical to long-term success, she says. Marketing professionals often talk about the importance of “building your brand.” However, what is it and why do you need to know about it? Branding is simply creating
a positive association with your product (and, for most advisers, that is you) that is then remembered by clients and prospects. “Branding is not a logo or an ad,” says Dan McGee, Vice President, Managing Director - Retirement and Investor Services Distribution, at The Principal Financial Group, “it is how you service and how you position your firm.” That, of course, is the essence of what helps you stand out from your competition—even when you may appear to be offering identical products and services. Jeff Justi, a pension consultant with Leavitt Pacific Insurance Brokers, is working on refining the message he and his company are
Illustration by Christopher Buzelli
january–february 2008 | 27
sales champ
Break ing
up When is the right time to end a relationship with a client?
When crooner Neil Sedaka performed “Breaking Up Is Hard To Do,” he could just as easily have been talking about a retirement plan adviser’s client relationships. The very notion of ushering a client to the exit is anathema to the typical sales personality—who ordinarily would rather lose a limb than a client—particularly in the competitive world of retirement plan services. Adviser Paul Grutzner, Managing Partner of ClearPoint Financial in Seattle, knows the feeling captured in Sedaka’s hit all too well and why many advisers prefer to stay mum. “I think some people just don’t want to get their name in the paper saying ‘We fire [clients]’,” Grutzner observes.
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november窶電ecember 2008 | 47
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Industry trends have many advisers taking another look at their revenue models Five years ago, 90% of Gallagher Retirement Services’ revenues came from commissions and 10% from fees, but that has changed. This year, 30% of the firm’s revenues will come from commissions and 70% from fees. Gallagher made a conscious business decision to evolve from being a broker to a value-added consultant, says Michael J. DiCenso, National Practice Leader with Gallagher Retirement Services in Itasca, Illinois. Gallagher’s decision has proved to be a wise one. The firm has had an explosion in growth attributable, in part, to the change in revenue model. “Revenues have grown dramatically as well as assets under care, not because we’re charging more but because we are acting as an independent, unbiased, objective consultant,” DiCenso says. In the last two years, Gallagher’s assets under care have grown from $5 billion to $30 billion, while staffing has increased from 50 people to 70 people. That 40% growth in staff at the firm, notes DiCenso, supports a 70% growth in assets under care. The plan adviser universe has gone through a transition of sorts— moving from a commission-based revenue model to a fee-based one. That transition started five years ago, but
A A New New Di mension Dimension Illustration by Chris Buzelli
may–june 2008 | 29
sales champ
Murky Waters How to work (a) with, (b) around, (c) through your compliance department
More than one adviser who wanted to be interviewed for attribution in this story could not because his compliance department would not grant permission. That is not unusual. Advisers often express frustration that their compliance departments interfere with them speaking to the press or in public. Others believe that compliance personnel hinder their ability to service clients adequately, and still others refer to compliance simply as “the sales prevention department.” It is generally not the actual rules that advisers find frustrating, but the process of getting approval. Timing is probably the biggest issue advisers have with compliance. For example, seminars have to be planned at least six to eight weeks in advance to accommodate the one or more weeks compliance departments require to approve materials. This can make it difficult to incorporate last-minute updates and news. According to one source, Morgan Stanley’s compliance department generally needs up to two weeks to approve any interview with the press and one week to approve any comments used in the article—delays that do not jibe well with the time frames of most publications. Of course, many small registered investment adviser (RIA) firms have no official compliance “department” to deal with. Cleveland Hauswirth Investment Management Inc. only has five principals, so the advisers themselves do the compliance, says Nan Cleveland, a principal at Cleveland Hauswirth, which manages more than $150 million in retirement plan assets, in Brookfield, Wisconsin. Retirement plan sponsors often want their advisers to serve as fiduciaries to the plan. Many broker/dealer compliance departments, however, still prevent advisers from signing on as fiduciaries to the retirement plans they service, says Bill Peartree, a principal with Barney & Barney LLC in San Diego, California, which derives approximately 45% to 50% of its business from employee benefits and retirement plans, and has more than $750 million in retirement plan assets under management. Not being able to serve as a plan fiduciary can be problematic, he notes. If an adviser cannot serve as fiduciary, the plan sponsor is apt to switch to one that will. On the other hand, Tampa, Florida-based Investech Retirement Plan Advisors has had a positive experience with the compliance department at its broker/dealer Financial Telesis, which works primarily with retirement plan advisers. They are very cooperative and solutions-oriented, says W.
Illustration by Chris Buzelli 42 | planadviser
july–august 2008 | 43
research
38 | planadviser
research
The
Right pieces
Advisers share their preferences for building a plan investment lineup Selecting a retirement plan’s investment lineup is frequently the job of the adviser or consultant working with the plan sponsor. After all, the client is likely to ask the adviser to help draw up the criteria for selecting such investments in the investment policy statement (IPS) (see “Statement of Purpose,” page 62), so why not help pick the funds to satisfy that policy? Nearly all advisers surveyed provide IPS design and investment monitoring and ongoing committee meetings as part of their regular service (96.9% and 98.2%, respectively). When asked their perception of tools used to select or monitor plan investment options, advisers gave Morningstar the highest ranking, with 58.3% of advisers expressing a “very favorable” perception, followed by Fi360 (45.4%) and Zephyr (40.9%). Beyond core investment management services, advisers look to investment management firms most commonly for research (56.5%), marketing collateral (44.9%), and conferences (41.3%). Nearly all (94%) advisers surveyed rely on performance compared with benchmarks as one of their top five considerations for fund selection and, of those who accord that level of importance, just more than half (53%) say it is their number one criterion. Other factors cited were manager tenure (76% said it was a top five factor —not surprisingly, considering its
Illustration by Charles Immer september–october 2008 | 39
research
Ca p
tu r i
ng t he p rof i le o f th e “t y pi ca l” r e ti r e men t pl a n ad vise r
g n i k r e a c i m t h c c a n r e P B ur Yo
g in z i n lt h i l a i pec w ea r s s a i n s t c r ea s e s i g n v a i d g ve are t in t it i n, a pla compe y t hey ompe t c a en me lv e s em ld s yeret i r emse h is fie t he sa r plo of a h m e t t e v g a s h s in und hin yh w it r t er d pitc f ten fo dv iser k t he ork e-qua s — an n n w e a o i re er d. . wh pace ho er, ho t h l h s s i t v , e w n t e v fi an an ad he pas plan s . How er s w nt pla v isers t h t e n l th rs ei re v is nt ad me tp In me v ise her ad ret i re ER of at mo emen er ienc r p t i re nt ad t i S h n e x I t t o i r e V ’ re t he ageme g i nto er t ise NA D nds re as des A p in eca n s fi u ma r unn an ex by PL g ram s’ ten two d — ly an ear pro ve y i ng ntage sur ment t five y ore th t a n v m s e e d r a c e a e e v ti A r ed re ve at l ose ha a h or h t s f s n t o spo nden third epo res hly on g rou
36 | 2008 planadviser national conference Illustration by Yuko Shimizu
october 2008 | 37
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Battle
Lines Advisers increasingly are embracing ERISA plan fiduciary status. Why they’re doing it, and how to prevent problems
Adviser Charles Snyder and his colleagues at Robert W. Baird & Co. Inc. saw the new reality emerging a few years ago: A growing number of employers want their retirement plan advisers to serve as Employee Retirement Income Security Act (ERISA) fiduciaries— and openly acknowledge it. “When we began to move up-market to larger plans, we were seeing a need for companies to formalize the relationship with their adviser, moving from a traditional broker/dealer arrangement to something contractual that stipulates clearly what services the adviser has been hired to perform, and what the compensation is going to be,” says Snyder, a Cleveland-based Senior Vice President at the financial services company and broker/dealer. So, the company spent a couple of years developing internal controls that allow it to “audit advisers like me to make sure that we meet all of our contractual obligations,” he says. For the past two years, Robert W. Baird’s plan-advisory contracts have specified that the firm serves as an ERISA fiduciary. Audit staffers at the company annually examine
Illustration by Jillian Tamaki november–december 2008 | 29
38 | planadviser Illustration by TK
research
a A Mvtter of r Perspective c What advisers see when looking for a DC recordkeeper partner
When it comes to picking a defined contribution (DC) provider, a consistent theme emerges. Those that “work as a partner with us not against us,” or let the adviser “work hand-in-hand with them” are best, according to respondents in PLANADVISER’s third annual survey of advisers about DC plan recordkeepers. However, what constitutes that cooperative, facilitating spirit can be as unique as the individual advisory firm—and even for providers that offer significant support services, our survey once again finds that retirement plan advisers can be tough customers. In fact, despite the fact that most advisers acknowledge receiving multiple support services from these recordkeepers, they, in general, do not seem to hold most vendors in high regard. Consequently, those providers who do receive high ratings from advisers truly have something to crow about.
Value Added Asked what kinds of support services or tools they rely on from these DC plan providers, the most common response is “training specific to DC plans,” cited by 63.5% of advisers, including specific mentions of instances where the vendors had pertinent ERISA information and regulatory updates—materials that, in the words of one respondent, allow advisers to respond “to the changing marketplace and demands from plan sponsors.” Plan benchmarking is cited by 59.5% of advisers, a category that encompassed such elements as helping the adviser determine “the best way for employers to accomplish what they want to offer,” and “providing plan-by-plan detailed demo graphic data that can be used in designing employee meetings.” Other common
Illustration by Chris Buzelli november–december 2008 | 39
cover story
The top four recordkeeping providers have about 51% of the defined contribution plan market share, says Charlie Nelson, President of GreatWest Retirement Services. However, more than 50 providers have at least 50,000 participants. “We have a highly fragmented defined contribution market,” he comments. Fragmented markets often consolidate, and the recordkeeping business is seeing a new wave of acquisitions. In May, ING Group announced its plan to buy CitiStreet LLC from Citigroup, Inc., and State Street Corp. It joins a number of recent notable deals to purchase defined contribution recordkeeping operations, including: Great-West Life & Annuity Insurance Co.’s acquisition from Franklin Templeton Investments; Prudential Retirement’s deal with Union Bank of California, N.A.; and Hartford Financial Services Group Inc.’s late 2007 acquisitions of Sun Life Retirement Services Inc.’s 401(k) business, as well as the defined contribution recordkeeping alliance business of Atlanta-based Princeton Retirement Group.
What advisers should do during a wave of recordkeeping consolidation
Illustration by Gérard DuBois 28 | planadviser
july–august 2008 | 29
cover story
The top four recordkeeping providers have about 51% of the defined contribution plan market share, says Charlie Nelson, President of GreatWest Retirement Services. However, more than 50 providers have at least 50,000 participants. “We have a highly fragmented defined contribution market,” he comments. Fragmented markets often consolidate, and the recordkeeping business is seeing a new wave of acquisitions. In May, ING Group announced its plan to buy CitiStreet LLC from Citigroup, Inc., and State Street Corp. It joins a number of recent notable deals to purchase defined contribution recordkeeping operations, including: Great-West Life & Annuity Insurance Co.’s acquisition from Franklin Templeton Investments; Prudential Retirement’s deal with Union Bank of California, N.A.; and Hartford Financial Services Group Inc.’s late 2007 acquisitions of Sun Life Retirement Services Inc.’s 401(k) business, as well as the defined contribution recordkeeping alliance business of Atlanta-based Princeton Retirement Group.
What advisers should do during a wave of recordkeeping consolidation
Illustration by Gérard DuBois 28 | planadviser
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