Industry Insight from Fred Barstein
Selling in a Mature Market

While recently visiting a small record keeping TPA, I asked about how they obtained new business, and the answer, which is typical for this type of provider, was “the fish just keep jumping in the boat”.  Essentially, advisors just keep bringing them new plans without much effort on their part.  Though they knew that this answer was fraught with issues for the future, when they might have to actually find the right fishing hole and strategy to find the fish, they do not have the resources to quantitatively improve their sales and marketing efforts.  For large national providers, the issues are immediate as fish are not “jumping in the boat” in the current mature market – in fact they are hibernating deep below the surface.  So how can providers in a mature market significantly increase sales?  Furthermore, what lessons can advisors, particularly the Elite 5000 in the DC market, learn in this situation?

The open architecture record keeping TPA’s are enjoying unprecedented success even in a maturing market, mostly because the trends are in their favor.  But less than ten have more than $3 billion with a national sales force, while there are approximately 40-50 with $1-$5 billion – out of a total of 500 record keeping TPA’s.  Moving past $3 billion and building a national sales force takes strategy, capital, and resolve.  While staying small is easy but potentially dangerous – “go or grow” applies to everyone, big and small, although attrition takes longer than for national providers attached to large financial service companies.  Looking at the sales and marketing strategies of larger record keepers, very few if any have gone beyond building a national distribution system of internal and external wholesalers, where the mantra is more is better.  Wholesaling has seen little if any innovation over the last 30 years, but that is still everyone’s main means of getting new plans.  Want more?  Just hire more wholesalers or copy the competition by partnering with TPA’s if they currently are not, add mutual funds if they are group annuity only, or move up or down market depending on their current position.  With the fish not jumping in the boat, competition tougher than ever, and and less emphasis on record keepers making a difference, hiring more wholesalers will not resolve the fundamental issues.

Lest the Elite 5000 DC advisors sit back and bask in their current success where sponsors are currently jumping in their boat, this is the time to conceptually innovate by seeking new sales and marketing strategies.  Whether partnering with payroll or employee benefit shops, hiring more staff, joining specialty broker dealers, expanding their service offerings, or finding ways to actually help participants move the needle on their retirement and then track the success, experienced advisors should learn the lessons of the record keepers who are now struggling in a mature market.  Though we do not believe that advice will ever become a commodity like record keeping, does anyone doubt that competition will get tougher, especially from well healed wire houses who are waking up to the reality that retirement, not asset or wealth management, is on the minds of most Americans?

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