Onboarding Clients

Newport Capital Group in Red Bank, New Jersey, winner of the 2016 PLANSPONSOR Plan Adviser Large Team of the Year designation, has many strategies in place to onboard and get to know new plan sponsor clients.

The advisory firm believes it is important to “thoroughly understand each plan sponsor’s goals for its company.” Immediately upon starting with a new client, the practice sits down with and asks its executives what issues are the most pressing—both for the company and for individual employees. As Newport Group puts it, having an “open dialogue during early onboarding sessions” is one of the keys to long-term retention. It may seem obvious, but having as many of the initial conversations in person as possible is crucial to establishing rapport.

“Only by assessing the real aims of our clients can we craft a coordinated retirement strategy that best serves to incent, attract, reward, retain and eventually retire its work force,” says Domenic DiPiero, the firm’s president. Through this open and in-person dialogue, the adviser may discover that a company is at risk of losing top talent to a competitor, or that its pension plan’s funding status is negatively affecting the company’s financial statements, or that the company has a disproportionate number of older employees who are unable to retire and are costing the company high health care benefit premiums.

Only once this information is in hand can Newport Capital put its service offerings to work, leveraging in-person service and electronic pathways, such as phone calls and emails, to assuage the finance department’s constant push to keep retirement benefit costs down while also meeting the human resources (HR) goal of attracting and retaining the best talent through generous benefits, DiPiero explains. Drawing on the early, in-person conversations about the goals and challenges of each employer, the advisory team can make its case for best-practice approaches, which may include automatic enrollment, re-enrollment and automatic escalation.

In line with Newport Capital’s emphasis on open communication at the onset of a client relationship, DiPiero says, the firm’s initial process is a “two-way interview” that creates a lasting line of communication with all committee members. The adviser team’s service model also includes “immediate and ongoing education that consistently engages committee members with topics such as current best practices, legislative updates and regulatory issues.”

Another main part of the onboarding service effort revolves around performing a “fiduciary forensic audit… [to]bring the plan into the high standard we require as a co-fiduciary,” DiPiero says. During this process, the Newport team works closely with the new client—in person and remotely—to uncover, rectify and document any existing plan-related issues that should be resolved early on. Completing this thorough analysis serves not only to protect the interests of the committee but also to set the foundation for a successful, lasting relationship.

And while establishing a strong rapport with the sponsor and committee, and improving plan design, are vital, so is participant education, the firm believes. This is why it develops a tailored education policy statement (EPS) for each new plan sponsor. “Increasing participation begins with a robust educational and communication initiative to explain to participants the importance of saving for retirement and to reiterate to employees the value of the benefit offered by their employer,” DiPiero says. “Using our tailored EPS as a road map, we first identify the participant and demographic groups not contributing or participating in the plan. … We then work with the plan provider to target those employees directly, using language and methods specific to each individual or group.”

The next step is to increase deferrals and start truly defining and pursuing work force retirement readiness. The firm “scours the demographics and offers solutions specific to the groups that are either falling short in deferral amounts or are projected to be unable to replace enough income in retirement,” DiPiero says.

Good Plan Data
The client onboarding road map presented by DiPiero is similar to those used at other firms. Hence, the firm’s success comes less from the uniqueness of its process and more from a commitment to a careful selection of which client relationships to pursue, when, as well as a lasting focus on thoroughness, discipline and premium client service.

According to Natalie Wyatt, vice president for business development at Innovest Systems in Lexington, Kentucky, advisers are unable to do any of their client onboarding work successfully without highly detailed and accurate plan data. In fact, the question of the quality of plan data must be addressed from the outset of any potential client relationship, and it remains a challenge to be managed throughout the relationship’s lifespan.

Wyatt’s firm provides technology services to trust, wealth management and retirement planning professionals—i.e., services focused on this very issue. She says the information gap can be particularly acute when a plan sponsor has never worked with a specialist adviser or consultant before. In such circumstances, the sponsor may be uncertain about where important plan information might be stored and how it should be processed and leveraged.

Common errors in plan data to watch for when starting to work with a new plan include those found in:

• Date of hire data. Was the employee hired for a part-time or a full-time position? Is he a rehire with prior dates of service? 
• Date of termination data. Did the employee go from full time to part time, transfer to another division or really terminate?
• Contract labor information. The Department of Labor (DOL) keeps an eye out for employees who are misclassified as contractors.
• Hours worked. Does the plan sponsor know how to properly calculate hours worked for eligibility and participation?
• Compensation definitions. Is the plan sponsor submitting the correct compensation per the definition in the plan? The plan could use different definitions of compensation for different purposes, based on the demands of nondiscrimination testing, using one definition to allocate contributions and forfeitures for rank-and-file staff and another for the highly compensated.

Wyatt suggests plan advisers establish a checklist of information they need from each client as well as errors to watch for, and have a process in place for all staff to use when coordinating data from plan sponsors to plan providers. New clients, and new internal advisory staff, will have to be carefully trained and instructed on their own responsibilities as pertain to managing plan data and ensuring prudent processes are implemented and followed across the board.

Generally, much of the information needed about participants can be sourced from recordkeepers and from the HR and payroll functions; however, it may not be handed over in an immediately useful form.

Automated Onboarding Solutions
Facing the challenges of fee compression, constant regulatory reform and increased competition, firms across the retirement services spectrum are stepping back and reassessing their approach to technology and process management. According to a white paper published by ProcessUnity, a provider of third-party risk and process management solutions for advisers and others scalable enterprises, financial services firms are “taking a really hard look at service delivery and asking how they can use their technology strengths to improve retirement plans and the management of clients.” The paper is aptly titled “Achieving Service Delivery Excellence in an Out of Control World.”

ProcessUnity argues, the leading advice-providers are developing a lower-cost operating model; emphasizing service simplification and a best-in-class customer experience that can be applied broadly and uniformly across new clients; focusing on market segments where services are most highly valued; exiting segments that are unprofitable; and updating existing business lines and leveraging the value of participant relationships for delivery of a broader set of lifetime retirement planning solutions.

The analysis finds that leading providers who build and centralize their “client service evidence” are learning that new customers are willing to accept some “feature trade-offs” in order to gain “benefits of using proven solutions that are tied to outcomes with predictable costs and optional upgrades.”

Focus on Service, Not Investments
Whatever the role processing technology may or may not have at a given firm, research from FP Transitions and SEI Advisor Network suggests that advisers willing to carefully manage the client experience from the very start of a relationship can generate serious return for their efforts. According to data shared by the firms, putting in place a process that prioritizes client management themes over portfolio management can increase the value of an advisory business by more than $1 million over a 10-year period.

The data comes from a study conducted by the two consultancies—an effort that looked back over 10 years of data gathered from more than 8,000 advisory practices. On average, firms that can be categorized as “client managers” add twice as much in assets under management (AUM) annually when compared with firms that fall into the “investment manager” category. 

“Despite the similarities found between the two practice models—with similar numbers of employees, age and experience of leadership, and a comparable client demographic—the greatest disparity between the two models’ performance lies in advisers’ activities and how they devote their time,” the research explains. Investment manager advisers report that they spend more than one-third (37%) of their time on money management activities such as fund research/benchmarking and client portfolio management, while the client-focused group spends less than 3% on these activities, according to the FP Transitions data. Further, client managers devote more than half of their time to client acquisition and client management tasks, compared with investment managers spending just 30% of their time on the same activities.

“With 34% of time saved, and not spent on investment management activities, client managers spend nearly twice as much time as [do] investment managers on client meetings—37% and 20%, respectively—and prospecting new clients,” the research states.

Vertically Integrated Advising
In the simplest terms, the solutions supplied by providers of third-party risk and process management solutions such as ProcessUnity, a risk management software solutions firm, will allow an advisory practice to identify and analyze the product-specific service pledges made by each adviser or client service representative, over time, to each new client. This gives a clear line of visibility from the top-level firm metrics down to individual client service agreements and portfolios, allowing for much more efficient and rationalized planning of the client service effort, by both dollar cost and man-hours.

Benefits include cutting down on unnecessary duplication of effort and getting the right staff to focus on the right work at the right time, both for new clients coming on board and for existing clients.

“The key is to develop controls for what the advisory business can successfully deliver, manage, support and sustain over time,” the firm suggests, in its white paper “Achieving Service Delivery Excellence in an Out of Control World.” “In the past, this has been difficult to achieve as information was not available in a centralized manner, but, rather, resided in multiple spreadsheets, across multiple siloed departments—or, in many cases, was not documented at all. Providers are assessing their current state while establishing new governance procedures, disciplines and tools to ensure that future services are developed and delivered profitably. Providers see this new model [supplying] their customers with enhanced access to ongoing innovation and increased satisfaction while gaining critical insights at each step to help accelerate decisions and action.”

ProcessUnity is far from the only firm working in this area. Orion Advisor Services, which bills itself as a portfolio accounting service provider for advisers, recently announced its integration with Quik!, a supplier of form automation services. The combined Orion/Quik! solution aims to “provide a seamless client onboarding experience,” having similar goals and features to those described previously.

The partnership converts electronic or paper-based files into a web browser that makes them fillable, interactive, secure and signable, the firms claim. Advisers are provided with access to client data directly through the application program interface and can instantly populate custodial and custom forms, including a firm’s own investment advisory agreements.

Jeff Kliewer, Orion’s manager of integration partnerships, in Omaha, Nebraska, notes, “Once the form is completed, advisers have the ability to download it as an editable PDF to print, or to share via DocuSign for an e-signature, efficiently completing the new account process.”

Art by Chris Buzelli