PLANADVISER - November/December 2018 - 21

For example, these early adopters may utilize predictive
analytics to gain insight that better protects clients' assets
against future market risk and to more efficiently personalize
the individual financial-planning advice they give. " Year
over year, we ask advisers, 'What is the greatest driver of your
profitability?' Year over year, adding new customers is the
top answer, " says Craig Hawley, head of Nationwide Advisory
Solutions, in Louisville, Kentucky. " Sometimes advisers don't
feel like they can take on additional customers because of
the amount of effort required. AI is allowing some advisers to
go down-market, because the time and attention it takes for
each of those customers is less. "
Beyond improving technology,
Fuss also suggests thinking about
whether it makes sense to outsource
some client work. " Many plan advisers
are doing everything for their plan
clients, " he says. " There might be
areas where it is cheaper to outsource
much of that work. " The adviser could
partner with a plan's recordkeeper
to provide participant education and,
depending on his expertise, outsource
investment legwork to a 3(38) or 3(21)
fiduciary adviser, or administrative
work to a 3(16).
Fuss recommends analyzing
outsourcing opportunities on a clientby-client
basis and putting them into
categories according to how much
of an investment you want to make:
each client, for your use. "
He suggests $300 an hour as an appropriate benchmark
for a lead plan adviser's hourly rate and utilizing timesheets
that have 15-minute blocks of time. " Unless you have good
information on the time element of the work, it's really difficult
to say whether a plan is profitable for you or not, " he adds.
Review client profitability regularly. It makes sense to
broaden a client's annual plan review to include the adviser's
services and fees, in order to ensure the value of the
services is a win-win for both the client and the adviser,
Stokes advises. " You should not just look at client profitability
at one point in time, " she says.
Stokes
recommends
grouping the clients
into categories:
high time and high
revenue; high time
and low revenue;
low time and high
revenue; and
" None of me, " " Some of me, " " Most
of me, " or " All of me. " Plans below a
certain asset and fee level may not
be worthwhile clients for an adviser,
and so they fall into the " None of me " category. Those in
the " Some of me " category are modestly profitable, and
an adviser can look to outsource as much of that work as
makes sense. Those in the " Most of me " category have solid
profitability, but outsourcing some specialized work can
be viable. Clients in the " All of me " category generate the
highest profits, and an adviser may not want to outsource
any of that client's work.
low time and low
revenue.
" You should look at it annually. "
Blue Prairie Group includes its
advisory services in clients' annual
reviews. " Every year we look at profitability
by client and make an
assessment of where we are with
each, " Parrish says. The firm's analysis
sometimes finds a mismatch of
services-given and fees-received, and
that leads to a matter-of-fact dialogue
with the sponsor. " We say, 'Hey, this
isn't adding up to where we need to
be. What levers do you want to pull to
get us where we need to be?' " he says.
That can mean raising fees or lowering
service levels somewhat.
For these conversations, Blue
Prairie Group shows a sponsor thirdparty
benchmarking data on plan
adviser services and fees charged for
similar work. " A client may say, 'Oh,
we can't pay that,' " Parrish says. " Then
we'll say, 'OK, let's talk about ways to right-size our service
model for your plan.' "
FIA regularly reviews its client fees and will proactively
Track time spent on client work. When it began studying
client profitability more closely, Wintrust defined the cost
for every client service it provided by meticulously tracking
the hours its team members spent on each. " We went back
to old-school Excel spreadsheets and tracked it that way, "
Peluse says. " Anytime a member of our team did anything
related to a client relationship, we were tracking that time.
Then, at the end of the year, we looked back at how much
time and resources we spent on each service. "
Attorneys and Certified Public Accountants (CPAs) track
their time closely, and advisers should do the same, Fuss
recommends. " You need to look at your 'billable hourly rate,' "
he says. " You might not send an invoice to a client that says,
'I worked on your plan for 19 hours this year.' But you want
to have an internal clock that calculates that number for
lower them if they benchmark excessively. " But if a client's
fee is too low, we also feel very comfortable saying something
like, 'You've been a client for 10 years, and you've been
paying a flat fee of $25,000 a year. But if we bid on your plan
today, our fee would be more like $55,000. We understand
that we can't get to $55,000 overnight, but let's have a threeyear
plan to get to where we need to be,' " Wetzel says.
In those discussions, Wetzel says, it is important to show
the client benchmarking data that illustrates what similar
plans pay for advisory services, so as to demonstrate the
value that the plan and its participants have gotten from
the advisory firm's work, and to have a reasonable plan for
increasing fees to where they need to be.
Often, FIA gives sponsors a timeline illustration of all
the improvements made since the firm started working with
their plan. The timeline shows not just asset growth over that
period, but also specifies any fee reductions achieved, as well
as improvements in plan design such as implementing automatic
features and adding a stretch match. " The only way
you can talk to them about raising fees, " he says, " is if they
understand the value you're already adding. " -Judy Ward
planadviser.com November-December 2018 | 21
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PLANADVISER - November/December 2018

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