401(k) Specialist Issue 3 - 2017 - 11

Sponsored by:
Value Proposition vs. Value
C
raig Rosenthal,
SVP, Advisor
Sales/Service for
Fiduciary Benchmarks,
sat with 401(k) Specialist
to explain what
separates outperformers
from also-rans, and
how advisors can achieve true competitive
differentiation.
401(k) Specialist What is the difference
between value and value proposition?
CR Simply put, a value proposition is
the starting line and value is the finish line.
By definition - a value proposition is an
innovation, service or feature intended to
make a company or product attractive to
customers. Value represents the " estimate
of something's monetary worth. " So, to me
value proposition is part of sales and value
is part of client service/retention. If the two
aren't aligned, there is a disconnect.
401(k) How do 401(k) advisors
effectively provide each?
CR When advisors talk about value
proposition, I often hear " I think I can " or " I
plan to " but a value proposition must be more
concrete. It's critical to make what you're selling
a deliverable. It needs to be " I will... "
Advisors are looking commoditization
in the face. Imagine you're comparing two
advisors. One says, " I can improve the
outcomes of your participants. " The second
says, " I will do X and provide metrics that
show how I improved your participant
outcomes. The second advisor has differen401(k)
What are best practices for
delivering a value proposition?
CR With a value proposition, the
401(k) advisor must be as quantitative
as possible to create differentiation and
ultimately value. Few sponsors evaluate a
single service provider when hiring; most
receive a minimum of three proposals.
Each of the advisors submitting a proposal
will include, " provides investment analytics "
and " meets with participants. " This
doesn't set expectations though.
The sponsor's interpretation of their
services can vary greatly. The advisor
might say they can improve outcomes
and the sponsor could think it means 99%
participation. It is critical that an advisor
make their value proposition specific
and measurable.
401(k) How should advisors think
about the value they provide?
CR Firstly, there is a quantifiable
method for measuring value.
Some consider benchmarking to be, " Here
is a list of services - I've checked off the ones
I provide. " There is no value in that exercise;
that is commoditization as 99% of advisors
may provide that particular service.
Let's look at investment analytics as an
example - saying you do it is one thing,
the difficulty or value associated with it is
tiated themselves by identifying what they
are going to do and then substantiating their
value through metrics. This approach builds
a value chain and stops commoditization.
another. If you have a CFA or CIMA on staff,
they have additional credentials and may
be adding incremental value through the
building of portfolios, enhanced investment
selection or customized reporting.
When your sponsor engages you in a fee
discussion, you should respond by speaking
about value first. For example: I am
acting as a 3(38) on your line-up and I have
a CFA selecting your investments which are
outperforming your peers. We also build
risk based models for your participants. " In
addition, we have implemented a quarterly
financial wellness program which is driving
improved outcomes. "
Differentiate yourself as an advisor. You
can do this by talking about what you do,
how you do it and the frequency or volume
with which you do it.
401(k) How does Fiduciary Benchmarks
help 401(k) advisors communicate value?
CR Fiduciary Benchmark's benchmarking
service ensures that fees and value
are always discussed together. We have a
patented method that guides advisors and
their sponsors through the consideration
of the quality, services, value and " extra
credit " items an advisor is providing to a
plan and its participants. We also calculate
a proprietary benchmark called FEEPOINTTM
,
which is an estimate of what an advisor
could be paid if their pricing was based on
the specific services, fiduciary status and
work or meetings being provided.
Following this process has proven to
increase a prospective and client sponsor's
appreciation of the work an advisor is
doing as well as ensuring that the advisor
is being paid fairly for their work. Advisors
are in a period of fee compression. If you
deliver value and measure it properly, fee
levels can be maintained or even increased.
Holding or gaining ground in a period of
compressed pricing is proof that your sponsors
understand your value.
About FBi: Fiduciary Benchmarks (FBi) is the
industry leader for independent, comprehensive,
informative and cost-effective benchmarking services
for the defined contribution space and now
offers a robust solution for the IRA marketplace.
ISSUE 3 2017 | 401kSpecialist.com
11
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401(k) Specialist Issue 3 - 2017

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