PANC 2017: Benchmarking Your Advisory Services for Clients

With advisers’ focus moving from investments to retirement readiness outcomes, benchmarking services has become more difficult, industry insiders say.
Retirement plan advisers’ work to benchmark their services has become more complicated, as the focus has shifted from selecting and monitoring funds for the investment lineup to, more comprehensively, ensuring that participants are the on right track to retire, said David Hinderstein, president of Strategic Retirement Group Inc., the moderator of Thursday’s “Benchmarking Your Advisory Services for Clients” panel at the 2017 PLANADVISER National Conference (PANC).

Timothy Irvin, a consultant and the corporate markets practice leader at Cammack Retirement Group, agreed that the process has become more difficult for advisers to prove their value. “It is difficult to determine how much to charge a client,” Irvin said. Cammack starts by looking “at all of our internal clients. We then try to get results from RFPs [requests for proposals]. We might, for instance, find out that we proposed charging too much.”

One software tool that Cammack has found useful is Time Keeper, a time-tracking management system, Irvin said. The tool has let Cammack executives know, for example, that they spend 45 hours a year on RFPs alone. The tool works similarly to the way professional groups such as law firms track their time, Hinderstein added.

Unlike Cammack, whose average plan sponsor client has $80 million of assets under management (AUM), Benedetti, Gucer & Associates specializes in serving plans with $1 million to $10 million in AUM, said Jaime Benedetti, a Certified Financial Planner (CFP) practitioner with the firm. For such clients, Benedetti finds that one-on-one discussions are the most effective way to explain his services.

Referring to a new client, a $1 million plan with one decisionmaker, he said, “I help [him] understand that I am a specialist. I walked [him] through our services and compared those with what they were previously getting.”

For the larger plan sponsor clients that Cammack serves, Irvin said, the “transparency on the firm’s time” is greatly appreciated. Additionally, Cammack charges a flat fee for virtually all—99.9%—of its clients, he noted.

NEXT: Inattention to fees at small plans 
Among small plans, fees are much less of a concern, Beneditti has discovered. “They wear so many hats,” he said. “The retirement plan is issue No. 21 for them, and they don’t want to deal with it. In fact, they behave more like a retail wealth management client” than a retirement plan sponsor client, he said. Thus, “fee compression is not an issue in the small market.” Nonetheless, Beneditti realizes he could still “get shopped,” which is why he keeps meticulous records of all of his work “behind the scenes,” particularly with respect to the fiduciary rule, and presents this to his clients annually.

Among larger plans, Irvin would like to see plan advisers stop “undercutting each other” by continuing to lower fees. “Well over half of our clients are priced too low,” he said. “You need to be able to turn away unprofitable business."

However, advisers do need to revisit their fees once they have done the heavy lifting of “vendor consolidation, investment overhaul, getting the participation above 95%,” Irvin said. “Once you have accomplished all of this, how can you then justify your fee?” he said.

The best way to offer value to the small-plan market, where the company may be closely held by one or more owners, Benedetti said, is “if you fix the plan design and lower their tax liability, such as through profit sharing.” If you provide that type of service, “they appreciate your value.” Moreover, he has found that the fees being charged to small plans “are usually too high,” making it easy for him to lower them.

NEXT: Stating your case

Irvin reminded his colleagues of the importance of educating sponsor clients about what an adviser contributes: “We should be in front of clients, telling them about our accomplishments, such as negotiating down a fee,” he said. “This leads to client retention. They don’t want to change their recordkeeper, investment managers or adviser if they don’t have to. Give them a reason to stay, by telling them about what you are doing.

“We are all commodities,” Irvin continued. “So, you have to go out of your way to call [your plan sponsor clients], take them out to lunch, build rapport, learn about their personal life. At the end of the day, this is an important way to retain clients.”

Hinderstein said, “Tell the client stories, such as about a large-cap growth fund, a 5500 audit. Describe the stories. Tell them, ‘We have your back.’”

And, Benedetti added, “Don’t use financial jargon.”