Fee compression continues to plague our industry. It has cheapened years of experience, thousands of research hours, and millions of face-to-face participant stories, making advisory services a retirement plan line item—at a price that’s constantly under the magnifying glass. Is there a better way to demonstrate value and change the fee compression dynamic?
Articulate Your Value
Of course! It’s about articulating your “front stage” services and all the behind-the-scenes staff hours that go into creating a flawless client experience.
That means tracking the hours involved in investment research, recordkeeper analysis, plan design consultations, regulatory updates, meeting preparation, financial wellness comparisons, employee education, and in-person committee meetings.
What the clients see is only the tip of the iceberg. They seldom recognize everything that goes into preparing for a conversation. Help your clients understand thatby tracking your time and articulating your behind-the-scenes hours. By doing this, you are leading the conversation and displaying your value rather than defending your fees.
It’s Not a Race to the Bottom
When a plan sponsor is seeking the cheapest option, they only see a commodity. They do not see value. Therefore, the cheapest price is the only price that will do. It’s a must-have; and if there was a lower cost, they’d take it. This is why selling on price is a short-sighted solution. It might win business today, but in the long run, it’s only a matter of time until the next cheapest thing comes around. Additionally, and more importantly, it tarnishes the professionalism of our entire industry.
Leverage Your Knowledge
When you think of your business, do you believe it to be common or specialized? Of course, it’s specialized! Your experience has tremendous value. When advisors position themselves as trusted partners, it elevates the relationship to demonstrate leadership, creativity and exceptional ability.
Read more commentary by Rebecca Hourihan here.
All clients have headaches, and here’s a secret: You know how to solve them! Find out what those problems are, then use your skills to remedy them with a quality solution. Here are three examples:
- If a client is failing nondiscrimination testing, partner with a TPA and discuss auto-enrollment. There’s a new $500 tax credit and now an up to 15% auto-enroll safe harbor (thank you, SECURE Act).
- If payroll processing is done manually, seek out a 360o payroll provider. API integration could reduce administrative errors and therefore future corrective measures.
- If the plan has a lot of participant loans, find a recordkeeper that offers an emergency savings option (e.g., MassMutual). This nest egg account could reduce future loan requests and thus reduce the administrative burden of keeping track of loans.
One last thing: keep in mind that commodities are cheap. Cost is only a factor in the absence of value. Help clients understand your professional expertise and respect your fees, because you are a professional. When your clients understand your value, you will be paid properly.
Thanks for reading and Happy Marketing!
Rebecca Hourihan, AIF, PPC, is the founder and CMO of 401(k) Marketing, which she founded to assist qualified experts operate a professional business with professional marketing materials and ongoing awareness campaigns.
