Making Your Mark

Crafting your value through investments?
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At the risk of having you disregard my request and move to something less interactive, I ask you to please pick up your pen. Envision and organize in your mind exactly “what your firm delivers” to (or for) clients. Keep it high-level. Consider using the 60,000-foot overview level on this one.

In the margin or on a scratchpad, scribe two—possibly three, but no more than four—functions that you and your team perform for each and every one of your clients.

Over the past 30 years, the retirement plan adviser role has morphed from one of captive advisers, selling “in-house” funds on a proprietary recordkeeping system (whether it functioned or not), into what you have described in the margin.

Ours is an industry—with very few exceptions—whereby the retirement plan adviser is no longer captive to a single family of funds, a single platform or a single style of management. The benefit of having access to options and choices offered through such an open structure as we enjoy today, is that most plan advisers are able to deliver the exact same solutions to a variety of clients. However, it is equally important that you simultaneously differentiate what you actually deliver outside of that same solution/product set.

Your View of the Tempest, from the Tempest

Is our industry better situated in today’s environment where captive investment funds and captive investment sales representatives are close to extinction? Helping plan sponsors select investments might still be part of your value proposition, but selling them the “right” fund, most likely is not.

Although most retirement advisers—and the adviser’s ultimate customer, the plan participants—recognize the benefit of having access to a broad spectrum of investments, our arrival to this point has resulted in blurred vision as the result of less clarity surrounding the role of the plan adviser. If a retirement plan adviser is not the captive adviser selling proprietary funds into a plan, or is not the traditional investment consultant, how is his role defined?

It seems as though “just about” everything that gets accomplished falls on the shoulders of the adviser. Unless, of course, a mission-critical task does not get completed (such as filing a Form 5500 or forwarding salary-deferral contributions to the custodian in a timely manner)—then, the plan sponsor is certain that the adviser should have accomplished it!

What does the retirement plan adviser “do” for the client? (This would be a good time to review the points that you have identified in the margin. Did you list investments or investment expertise as one of the two value-added functions you provide?)

Corn, Wheat and Copper

There are limited exceptions, but relying on investment selection as a differentiator of your retirement plan services is passé. It will not work. Investments are no longer a stand-alone talking point. There is a high probability that more than 10 advisers within 10 miles of your office could offer the exact same 10-fund lineup as you! We are in a commoditized world of retirement plan investments.

Outstanding versus Blending in

Considering the actual investments as the commodity they are can open you to a world of opportunity around “what you are accomplishing” for your plan sponsor clients and plan participants with those investments. In the effort to satisfy client needs—and our own adviser-centric needs—we are forced to remain current on industry trends in the form of behavioral finance, regulation, legislation and product development. Each of the afore-mentioned industry-sleeves-of-knowledge comes with its own learning curve, idiosyncrasies and, in some cases, continuing education requirements.

Differentiation becomes simple and effective when communicating with prospects, how you use the output from the investments. Referencing behavioral finance theory becomes closer to reality when you reference the implementation of specific investments that you have incorporated for other clients. Safe-harbor QDIAs can be given a name and an outcome when associated with a specific investment and client example. Income-replacement ratios become more meaningful when you are able to reference live account examples and the investments utilized.

Look back to the margin—what two things did you write down? Is that what you really “do” for clients?

Steff C. Chalk is CEO of the Fiduciary Consulting Group, a fee-only fiduciary consulting practice ­serving corporations and nonprofits. A judge for the PLANSPONSOR Retirement ­Plan Adviser of the Year award, and a faculty member of the PLANSPONSOR Institute, he is also the ­co-author of How to Build a Successful 401(k) and Retirement Plan Advisory Business.