Networking, Not Cold Calling, Wins Plan Sponsor Business: Franklin Templeton

Study of DC market, “Insights on Closing the Sale,” identifies best practices for lead generation, prospect management and finals activity

Advisors who serve the defined contribution retirement plan market are much more likely to win business from DC clients by networking than by cold calling, according to a Franklin Templeton Investments survey released Wednesday.

Indeed, the survey’s findings show that 81% of plan sponsors sought advisors through recommendations or referrals, and less than one quarter responded to an advisor solicitation. In addition, 60% of plan sponsors cited “personal fit/sales process” as their method to initially screen potential advisors–and these two criteria trumped both price and expertise.

Pricing, notably, was more likely to lose a bid for an advisor than win one, according to the Franklin Templeton survey, whose results are published in a white paper, “Insights on Closing the Sale,” available on Franklin Templeton’s Retirement Center website. Franklin Templeton Investments manages over $125 billion in retirement assets as of Sept. 30 for individuals, small businesses and institutions.

The paper addresses three key areas: lead generation, prospect management and finals activity.

“Business development strategies ... are critical when vying for business in today’s highly competitive retirement plan marketplace,” said Yaqub Ahmed, senior vice president and head of Investment-Only Division-U.S. for Franklin Templeton Investments, in a statement. “In an environment where relatively few plans change record keepers in a given year, our research provides actionable insights advisors can use in building their retirement plan business.”

Networking Is Essential

Clearly, the study results highlight the importance of networking. More than half of plan sponsors reviewed at least five advisors in conducting their search, and the vast majority, at 81%, sought advisors through recommendations or referrals from colleagues, peer organizations or retirement plan service providers. Less than a quarter of plan sponsors responded to an advisor solicitation.

When asked what criteria they used to initially screen potential advisors, plan sponsors cited:

  • Personal fit/sales process (60%)
  • Pricing (53%)
  • Experience/expertise (44%)
  • Prior relationship (5%)

“When it came time to select an advisor from among those considered as finalists, plan sponsors continued to most frequently cite ‘personal fit/sales process’ (55%) as an attribute leading to their decision,” according to the study results. “However, other attributes–most notably ‘pricing”–were greater factors in situations when the bid was lost than when the bid was won by the advisor. These results suggest that some components of the bid must be addressed well enough to satisfy the plan sponsor, but may not be what ultimately leads the plan sponsor to choose one advisor over another.”

Rare Window

The study, conducted for Franklin Templeton by independent market research firm Chatham Partners, offers a rare window into how plan sponsors select the advisors for their retirement plans. The sponsors’ plans collectively represented more than $6 billion in assets.

Specifically, Chatham interviewed plan sponsors that had recently completed a retirement plan bid process about new business prospects submitted by advisors. During these 30-minute discussions, sponsors were asked what led them to initiate a search for a new advisor, how they identified potential advisors and what factors they considered in choosing the winning proposal. They also were asked to rate both the winning and losing advisor on their management of the business development process and overall service offering.

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