Value-Add Tools Best Way to Stand Out

Who is using value-added tools from providers, and are they a useful addition for sales, lead generation and other facets of an adviser’s business? 

In the defined contribution (DC) market, sales and value-added programs are more closely linked than in any other segment of asset management. But there is little research or documentation that really scrutinizes these programs or identifies industry best practices.

“Changing the DC Advisor Value-Add Game: Maximizing Your Investment in DC Advisor Value-Added Programs,” an upcoming survey report by Chatham Partners, takes a deep dive into these tools and programs, the firms that offer them, and what users think of their quality and usefulness.

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“We wanted to put together something unique around the issue of value-add,” says Bruce Harrington, a broker/dealer practitioner and a co-author of the report. Value-added programs have accrued a lot of resources, he tells PLANADVISER, and people spend a lot of attention on them.

Compiling input from hundreds of financial advisers, as well as retirement heads at broker/dealers and industry executives at DCIO and recordkeeping firms, the research gives a really interesting perspective, he says. Harrington describes himself as more of an industry person, which he says made the collaboration interesting. (Joshua Dietch, managing director of Chatham Partners, brought his research background to the project.)

Chatham wanted to create a metric that boils everything down to a number to produce an index, Dietch says: “We thought, ‘What are the things that you [the provider] would view as the desired outcomes of offering the value-added program?’”

Level of satisfaction in five areas of tools and programs—practice management, sales and lead generation, plan sponsor engagement, plan participant engagement and intellectual capital or thought leadership—were ranked for one part of the score.

Value-added tools and programs need to create awareness as well as differentiation for a provider, and these two areas are also scored. Adviser willingness to reward a provider with additional business as a result of superior value-added tools and programs was also scored, as well as how frequently a provider is cited as offering the best value-added programs.

The index includes a net promoter score, which represents the client’s likelihood of recommending the recordkeeper or DCIO firm they named as providing the overall best value-added tools and programs.

Surveying the Programs

Once these metrics were developed, the survey was simple. Dietch said it had just three basic questions for each category: Do these programs help win business for our firm? Do they differentiate us? Do they lead to more incremental sales? “We asked these questions of all the advisers about their preferred provider, investment firm or a recordkeeper,” Dietch says. Last, they asked about the frequency of mentions for a firm. “Frequency is indicative of popularity but also of quality,” he says. “It means preferred providers who are doing something right.”

Value-add programs vary, and one size does not fit all, the report found. Often the appeal speaks to an adviser, channel or target market segment. True specialist DC advisers are the likeliest to value and use intellectual capital pieces, and wirehouse advisers are more apt to use practice management tools.

“People often take issue with thought leadership,” Dietch says. “It’s just another way to ‘kill a forest’ using up all that paper for printing research. But at the end of the day, the most voracious consumers of thought leadership are the advisers who earn the bulk of their income from retirement plans,” he says. “They’re always looking for ideas that either benefit their practice or benefit their clients, and they can take that intellectual capital and make it their own.”

Another key takeaway is that value-added programs open doors or break ties. “It’s helpful to know who the adviser’s clients are as well,” Dietch says, “and what issues are really important to them. If I am an adviser and I’m selling to small-business people, I might not walk in the door talking about my sophisticated investment selection process.”

Data in the report shows somewhat low marks for programs and tools that specialize in sales and lead generation (4.61 and 3.66 out of a possible 7). Nearly half of advisers surveyed (47%) strongly agreed that value-added programs in sales resulted in provider recommendations, and just 14% strongly agreed that value-added programs in lead generation resulted in provider recommendations.

Target Audience

Awareness, differentiation and driving sales are the three key points, Dietch says, but the conception versus the execution of the programs seems to have a bit of a gap. “In some ways, you have to really think about who you offer to, what you offer them, and how you deliver.”

When value-added programs are developed, Dietch notes, perhaps some disconnect is inevitable. “Internally, you have marketing, products, sales—all these constituencies,” he says. “Externally, there is the adviser, the broker/dealer and advisory firms. What kind of synthesis of insight are you doing to capture all those perspectives?”

Measurement is another key, Dietch says. Some firms do not measure anything and say it’s too difficult, he says, but his firm tracks at the team level. Many factors can be measured. “If I route advisers through our home office we flag those advisers so we can baseline their activity and measure output,” he says. “What level of activity comes from new content? Does certain activity produce a spike?”

The ultimate goal of any DCIO firm and recordkeeper is attaining the status of preferred provider, and being a DC adviser’s preferred provider and offering top-notch value-added programs are strongly correlated, the report found. Chatham measured the percentage of overlap when ranking the strengths of value-added programs and in designating a provider as preferred.

Dietch says the strength of that overlap was surprising. “It was the first time anyone has validated the thesis,” he says. “Maybe we were just patting ourselves on the back; I don’t know,” he says. “People have always said value-add is a means to open doors or break ties, and we wanted to test that thesis, and largely it is true.”

However, the simple offering of a value-add may not be enough, Harrington says. “Just because you do it, doesn’t mean you do it well,” he points out.

“Changing the DC Advisor Value-Add Game: Maximizing Your Investment in DC Advisor Value-Added Programs” will soon be available through Chatham Partners’ website

How Employee Benefits Are Evolving

Experts in health care and retirement are concerned that the federal government is seeking new sources of tax revenue, says an EBRI report.

Probably the most negative thing to have happened in benefits in the last 35 years is the increasing political focus on tax expenditures, says Larry Zimpleman, chairman of The Principal Financial Group and former chairman of the Employee Benefit Research Institute (EBRI), in the report. Simply put, the government sees tax-advantaged health and retirement benefits as causing “foregone” revenue. Those in the retirement industry have examined some of the potential impact of proposed tax reforms (see “How Tax Reform Could Affect Retirement Plans”).

The report expands on discussions at EBRI’s 73rd Policy Forum, where industry experts and leaders spoke with an audience of employers, regulators, policymakers and employee benefit providers. Broadly, the forum examined how employee benefits have changed dramatically in the past 30 years and are certain to continue to evolve.

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The report findings include:

  • Since 1975, the year after the Employee Retirement Income Security Act (ERISA) was enacted, total coverage and active participation of the employment-based benefits system has grown significantly, but that the mix has changed dramatically;
  • A “massive change” has been taking place over the last 30 years or so in terms of the types of health benefits offered by employers;
  • Nursing home and home health care costs are “the most important risk in terms of looking at families that seem to have enough money and end up running short of money in retirement”;
  • ”Short termism” dominates the thinking of many employers today, out of necessity;
  • Employers want cost control, and voluntary platforms and defined contribution-type programs better allow them to control costs;
  • The prolonged recession masked a “profound transformation of the economy, namely the sourcing of jobs from human beings to robots, software programs and algorithms;
  • Women are in the workforce now in almost equal numbers to men, and dual earner couples have become the norm; and
  • For Millennials, it is not simply workplace benefits that are increasing in importance, but those that provide advice, counseling and recommendations.

The full report is published in the July 2014 EBRI Issue Brief under “Employee Benefits: Today, Tomorrow, and Yesterday,” which can found at http://www.ebri.org.

The Employee Benefit Research Institute is a nonpartisan, nonprofit research institute that focuses on health, savings, retirement, and economic security issues.

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