Words of Wisdom

The five finalists for the Retirement Plan Adviser of the Year award shared some of their best practices at the 401(k) SUMMIT yesterday.

Troy Hammond at AmeriFlex Financial Services in Santa Barbara, California; Chad J Larsen of Moreton Financial Solutions, a member firm of National Retirement Partners in Denver, Colorado; Tom Noble, from Noble Retirement Group in Sugar Land, Texas; Jim O’Shaughnessy of Sheridan Road Financial in Northbrook, Illinois; and William M Peragine III with Morgan Stanley in Jericho, New York spoke about how they run their firms, get paid and serve clients, sharing some of the practices that made them the finalists for the award with attendees at the 401(k) Summit in San Diego, California.

Asked the hardest lesson they learned in dealing with retirement plans, a common theme was dealing with clients who are not dedicated to helping their employees save for retirement. Although a plan sponsor thinks their employees all have a retirement plan as soon as the firm sponsors a 401(k) plans, Peragine said, it is just a tax-deferred savings vehicle until people use it to save for retirement, at which time it is a retirement plan. Larsen recalled getting told by a client that he couldn’t do more enrollment meetings because the CFO didn’t want to have to pay more matching dollars. Realizing that there would be cases in which he cared more about the employees’ retirement than the client did was a difficult lesson, Larsen said. Hammond agreed, and said that he had make the mistake of thinking he could change the corporate mentality of the company and get them to care, which never worked, he said.

In searching for new business, referrals and words of mouth were the best source of prospects for both Peragine and Hammond, who said referrals from current clients and “centers of influence” (ERISA attorneys, benefits brokers, CPAs, etc) account for 95% of their business. Seminars were cited as a top prospecting tool by both Larsen and Noble; Larsen said he works with a major local employer group, which has led to new business for him and Noble said that although he has been very successful in running seminars as a prospecting tool, he has also been able to get new business from existing clients by hosting luncheons for them and speaking to them about what else he and his team can offer them.

Client Touchpoints

O’Shaughnessy said that, in working with participants, he believes you have to make it as easy as possible for the participant to effect change, by using such tools as quick enrollment. Further, he explained, he has had good success with targeted communications and face to face meetings. Larsen said he doesn’t agree with the widely circulated pronouncement that group meetings “don’t work;” only bad group meetings don’t work, he said, explaining he has seen some very successful group meetings.

Each adviser however, admitted that as their businesses have grown, they have had less time to spend with participants. Part of this is because the operational aspect of running the businesses take more time, O’Shaughnessy explained, commenting that he misses the time he used to have with plan participants.

Peragine said that in order to serve the clients, his team has tried to segment job functions on the team and touches plan sponsors eight times per year in some form. One way his group reaches out to participants is to have a dedicated toll-free number which is put on the vendor’s statements and on their VRU.

Noble has addressed this issue by saying that every client, regardless of size, receives quarterly reports, which leads to a follow-up phone call with which Noble and his group tries to schedule either committee meetings or enrollment meetings to get in front of either the plan sponsor or participants.

Although the growth cited by all was positive, in addition to having less time to service clients, there is also an issue of trying to replace yourself, Hammond said. It is difficult to figure out who you need to hire as you take your business to the next level, he commented, and then once you do find the right people, you have to train them, which is all time consuming in itself.

Looking Forward

Most of the finalists have made some changes to their compensation structure in the last few years, though not all as a result of events in the industry; however, Noble commented that they way he charges has had to evolve based on industry decisions. Peragine said he believes the industry is catching up to his team’s philosophy, which has been level compensation and full disclosure.

Larsen and O’Shaughnessy have shifted to start taking more of their business from a fee model. Larsen said he gives his clients options and tells them they can select how they want to pay. Although he said he hasn’t changed his fees to clients specifically, Hammond said his firm has determined that in they have to receive a certain fee amount in order to deliver the list of services they want to offer to clients.

PPA’s Impact

Advisers were generally positive about the impact of the Pension Protection Act (PPA) on their business, saying it will be good for business. O’Shaughnessy said that new plan design features, such as automatic enrollment and automatic deferral increases, among other things, in the PPA give an adviser an opportunity to be proactive and go discuss these provisions with clients.

However, Larsen said, there is still work to do. Hammond agreed, saying that the wrinkles regarding investment advice have not been ironed out. However, he cautioned, that issue could be overshadowed by the discussion around fee fairness, and if this leads to overregulation, this would be bad for business and it would be a step backwards.