Retirement Planning > Retirement Investing

The Successful Retirement Plan Advisor, Pt. 1: 3 Traits They Share

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This is the first in a five-part series defining success for retirement plan advisors by Liz Davidson, who as president of Financial Finesse has a unique vision of who the most successful retirement plan advisors are, and what they have in common.–Ed.

This past year, I’ve had the pleasure of working with quite a few top advisors in the country, independent wealth management and retirement plan advisory firms, most of whom manage billions of dollars in assets. I’ve also spoken to a lot of plan advisors who aspire to reach that level of success, but haven’t been able to do so despite doing all the things they were taught to do when it comes to networking, prospecting and trying to close new business. 

Many have vocalized how hard it is to stay independent and keep the lights on, and they are right. The market is very tough and it may become tougher, particularly for plan advisors.  Fee disclosures have put pressure on the entire industry to do more for less, and many of the practices that were innovative just a few years ago have become commoditized.  With plan advisors having the same—or at least similar—approaches to investment reviews, vendor searches and fiduciary best practices—it comes down far too often to price. The big players can afford to “buy” the business as a strategy for forcing small players out of the marketplace. 

So why then are most of the advisors we work with thriving?  All have grown their practices fairly significantly in this tough environment, and a good percentage have actually increased pricing. 

Here’s my perspective on the three core reasons why they are able to achieve what has eluded so many others:

1. They have a 10-year vision and very clear one-, three- and five-year plans. 

The vision is typically the driving force and changes very little—it’s the roadmap for where they want to go, who they want to be and what areas of the industry they want to play in.  The plans provide the structure for how to achieve the vision, but are built with the perspective of understanding that markets change in ways that none of us can anticipate, and that the plans need to evolve accordingly.

They train their people to be both proactive planners and nimble executors, with very clear objectives but freedom as to how those objectives are achieved.  All have processes, but a very clear understanding that the process is the means to the end, and should be continually refined and improved based on client feedback and ever-changing market conditions to achieve the best results.

Two CEOs I know at very rapidly growing rival firms are both fastidious about their planning. While not done in a bureaucratic or formal way, all decisions they make stem from their long-term vision. Moreover, every single team member in their firms can articulate the vision with clarity, and understands how their job connects to the plans and goals of the organization. Sounds simple, but it’s actually very rare.  Interestingly, each of these CEOs considers the market positioning of the other’s firm in their planning.  Rather than regularly competing head to head, they’ve each come to independent conclusions about where they are stronger than each other and where they are weaker relative to the other, and have crafted their market positioning accordingly.

One pursues a volume strategy, dependent on cross selling and economies of scale.  This firm has developed a suite of services with tremendous infrastructure and processes to scale cost-effectively, in a way that meets the needs of clients that prefer to implement a proven, standardized process.

The other has specifically built a brand that appeals to very large companies that want a customized, boutique level of service and are willing to pay for it.  He has fewer clients, but makes more money per client, at fees far beyond the industry average, because of the reputation he has built and the value he is able to bring in terms of addressing client’s strategic objective.  Both are profitable, both are growing and there is room in the market for both.
2. They are ahead of their clients. 

They actively listen to clients’ challenges, but instead of reactively responding to client requests, they identify the common themes and patterns in what their client’s concerns are and come up with ideas, strategies and, most important, new products and services that address client issues.  In some cases, they even spot issues their clients hadn’t identified and develop products and services to address these issue, knowing that when they do bring these to market, their clients will respond.

I could share a lot of stories of advisors who have taken this approach and used it to differentiate themselves and significantly increase their market share, but the one that stands out most in my mind is Jason Chepenik’s story.

Jason Chepenik joined his father’s firm, Chepenik Financial, in 1999, and has guided it to where it is now one of the leading providers of individual investment planning, corporate benefits and corporate retirement planning services in the industry.

Jason took an active voice in the industry from the start, speaking before some of the most influential players in the retirement plan industry, including the Department of Labor, to help shape retirement plan policy, fee transparency and best practices in 401(k) practices. What Jason realized at that point was that the industry would ultimately have to change or die, and he became a catalyst for the change he was convinced needed to happen.  

Long before plan sponsors were explicitly talking about the importance of participant retirement outcomes, he was advocating for his clients and the industry as a whole to redefine plan success through participants’ retirement preparedness rather than strictly focusing on investment performance. As a result, his firm has flourished while others have collapsed. His innovative approach to plan success metrics led his firm to be way ahead of the curve when plan sponsors began demanding a more holistic, participant-centered approach from their advisors in response to a difficult economy.
3. They understand the difference between expenses and investments.  All of the top firms control commodity expenses like travel, office supplies and software that has become commoditized, but all also make investments in the areas that they think will be the biggest differentiators to their business. 

To a one, they are impatient with expenses (often teased by their staff for their frugality about even the smallest expenses), but set realistic goals and exhibit appropriate patience for investments, recognizing that overnight success is a myth and to get to where you want to be five years from now, you need to begin to commit resources today.   

Most don’t have fancy offices, but they have excellent infrastructure, very strong teams who are well-appreciated and compensated for the value they bring to the table, the appropriate amount allocated to the marketing activities that generate business, and service offerings that are absolutely top notch with no expenses spared.

Every single successful advisory firm that I have come to know personally has followed this principle. One group spent 10 years cultivating a relationship with a Fortune 500 company, doing education and 1×1 financial planning for free for employees at the company, knowing that when they retired, most employees would turn to them to manage their lump sum pension payouts.  It has worked exceptionally well, with a very strong word-of-mouth following that has resulted in the firm being among the largest and most profitable independent financial advisory groups in the country. 

Others have made significant investments in technology or marketing that might have seemed entirely counterintuitive at the time based on their revenue, but were actually pivotal strategic decisions that catapulted them way ahead of the competition.  All cases required a leap of faith and different kind of mindset than most advisors have. 

My friend and prominent executive coach Joe Cullinane calls this the difference between being a small business owner and a true entrepreneur. Small business owners see all expenses as painful and something that needs to be reduced at all costs.  Entrepreneurs control commodity costs with equal, if not greater, ferocity but are willing and eager to make investments in their own growth—investments that might even seem foolish at the time, but are, in reality, wise strategic moves based on the direction of the market and the best way to grow their own firms within the marketplace. 

In our upcoming series of columns on this topic, I will be sharing case studies about the most successful advisory firms with which Financial Finesse has worked, exploring they have managed to beat the odds in this difficult marketplace to grow at disproportional rates, all while building a lasting reputation and legacy in the process. That in and of itself is one of the biggest lessons from this kind of analysis:  In my experience, financial advisors focus on their failures—the clients they didn’t get, the goals they didn’t achieve—and try to identify what went wrong. 

Personally, I believe it’s impossible to build a great and enduring business by “not making mistakes” (though there’s something to be said for that as an investment strategy).  Instead, I think we need to look to leaders in the industry and learn from what they have done right.  Their successes shape their personal legacies, but they can also inspire the rest of us to create our own. 

In the next four parts of this series, Liz Davidson will present case studies of three particularly successful advisors in the retirement plan space, followed by a posting in which she suggests the practical steps advisors can take who want to succeed in this unique business.-Ed.

*Full Disclosure:  Most of the firms mentioned above have launched Financial Finesse’s financial wellness services to their clients. They are a small subset of total advisors that Financial Finesse has worked with in this capacity, and were selected for inclusion based on their business success and the principles they follow.