401(k) Specialist Issue 2 - 2016 - 38

CLIENT ACQUISITION
While delivering advice to retirement
plan sponsors and participants can be an
excellent service model for advisory firms,
in our experience, it is possibly the most
complex business that advisors can choose.
Consequently, to be successful requires some
serious consideration and preparation to get
in the door and attract the right clients.
Typically, advisors back into the 401(k)
business through existing clients who own
businesses that either have a 401(k) plan or
need one. Because they are already advising
the business owner on their personal
finances, including retirement, they view
working with their client on their business
retirement needs, and possibly with their
employees on their personal finance needs,
to be a logical way to expand their business.
And while that maybe theoretically true,
we find firms that aren't ready to handle
the rapidly increasing workload and client
needs, run a very real risk of delivering
sub-par client service-which not only can
damage their relationships with key clients,
it can also tarnish their local reputations,
hurting both referrals and other potential
client relationships.
To successfully enter the 401(k) market
and attract the right clients, advisors need
to have a clear vision of what their firms
are, and what they want them to be. To do
this, we ask our client firms to answer the
following four questions, which we call the
" X-Cell " process, which is outlined in our
new white paper (http://www.kaleido.net/
x-cell/). It's meant to help firms get past the
gatekeeper and in the door to provide these
services to clients who really need them:
1. Who are the target clients for this
new service? Having a few clients
with a particular need (such as 401(k)
plans or advice) isn't really a very good
basis for adding a new service model.
We find that very successful firms
(those with the highest profit margins)
focus on clients with whom they have
an affinity: an advisor who previously
retired as an executive at a Fortune 500
company might target other execs at
38 ISSUE 2 2015 | 401kSpecialistmag.com
that company; a retired dentist might
target other dentists, someone whose
father was a doctor might target doctors,
a younger advisor might target
young people starting their retirement
savings, those who like charitable
giving might target people who are
so inclined, etc. Or you can just pick
a group, and become an expert in
that group: one advisor in California
became an expert in the personal finance
issues of vineyard owners which
was a natural transition into offering
401(k) services. A firm can work with
more than one target group, but not
so many as to reduce efficiency: We
find three to five client profiles to be
about the maximum. The point is that
financial advice is a very personalized
service: Having a connection with
and/or liking one's clients increases the
likelihood of great client service. The
401(k) business is no exception. By
focusing on an attractive client profile,
an advisory firm can develop a deep
expertise in the needs of that group,
and then deliver the services required
to meet those needs. The firm becomes
more efficient because all its clients
have essentially the same needs, marketing
becomes more effective, referrals
increase, and training of staff becomes
much easier, reducing costly mistakes
that will erode your profit margin.
2. What are the financial needs of
this client group(s)? While it's true
that most financial planning/financial
advisory clients have fairly similar
needs, there can be major differences
in the needs of specific 401(k)
client profiles. For instance, if one of
your profiles focuses on execs at one
company, they will probably have a
benefits program, retirement plan, a
stock option, bonus, and compensation
structure in which you'll need to
become an expert. If another profile
focuses on business owners, they'll
probably need business consulting,
accounting, insurance, benefits, and a
pension plan. Medical practices have
their specific issues as well. You may
choose not to help with all the needs
of a target clientele, but to be successful,
you do have to know specifically
what all their financial needs are. In
the 401(k) business, you'll also need
to consider scale: how many firms and
firm owners, and other executives can
your business realistically service, and
how many employees? Employees that
require on-going financial planning
and asset management will often take
a substantial amount of time and effort
relative to the size of their portfolios,
which can often pose significant
challenges. Of course, the new digital
advisory platforms promise to offer
attractive solutions. All these considerations
will determine whether you
work with businesses with under 20
employees, 20 to 50 employees, over
50 employees, etc.
3. What of the above services do
you really want to offer to clients?
As we said, you don't have to provide
services for all the financial needs of
your profile clients, but you do have to
provide some essential services. Your
answer will depend on the current
expertise of the advisors in the firm, as
well as their preferences for performing
specific services. But those advisors can
also add an expertise or two to their
resumes, and/or the firm owner(s) can
hire advisors with additional expertise.
What's more, firms can also form strategic
partnerships with " advisors " who
have any missing expertise (insurance,
accounting, retirement accounts, trusts,
etc.), which would enable them to
offer all or most of the services that
their target clients need. Much of these
decisions will be based on what the
owner advisor(s) want their business to
look like-but the starting point has to
be the needs of the firm's clients, not
the other way around. In the 401(k)
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401(k) Specialist Issue 2 - 2016

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