PLANADVISER - September/October 2019 - 22

According to Richard Applegate, some plan advisers pay
too little attention to having a sustainable business. " What
we're seeing now in the marketplace is the same mentality
as a broker's, but on a fee basis: 'I can do it for less,' " says
Applegate, senior financial adviser and managing director
of DBR Fiduciary Plan Solutions in Pittsburgh. " There are
many people rushing into this business just looking to get
the plan assets, and if that's all they're doing, they will
end up being disappointed. It's their own issue-not the
client's-because to get the business, they promised the
client the moon and the stars. "
Plan advisers who want to build a sustainable business
Quitting Time
WHEN should a plan adviser
consider ending the relationship
with a plan sponsor client? Possibly
under these circumstances:
* The sponsor is uninvolved. " It
hasn't happened often, but the
termination of a relationship for
us is usually because of the lack of
involvement on the client's side to
fulfill its own fiduciary responsibilities, "
says Richard Applegate of DBR
Fiduciary Plan Solutions. " What I'm
most concerned about is, are they
doing their part to mitigate the fiduciary liability? If a participant ever sues the
sponsor, you are always going to be enjoined in that suit as the plan's adviser. "
* Big logistical obstacles exist. David Hinderstein of Strategic Retirement Group
has ended only one client relationship-with a West Coast company that was difficult
logistically for his East Coast firm to service. But he recalls an adviser who
wanted to drop an unprofitable client asking him what to say. " You can say, 'You
know, I don't think this relationship is working for either of us. I know how important
the plan is to you, and doing a good job for our clients is very important to us.
I'd like to figure out a transition strategy to end our work with your plan. "
* Your firm is changing markets. Over the evolution of his former firm, InTrust
Fiduciary Group, before he joined CAPTRUST, Michael Maresh and his colleagues
switched from targeting small plans to midsize and large plans. " In some cases,
we had to say, 'We're shifting markets and now have a different service model and
revenue requirement, and we'll need to help you transition to another adviser,' " he
says. " If we continued serving these plans with our new [higher] fees, that could
have put those sponsors at risk of now paying unreasonable fees. "
* The plan doesn't grow. In his days as a registered investment adviser (RIA)
building a stand-alone firm, Maresh says, the practice occasionally took on unprofitable
clients, expecting these small plans would grow profitable in time. " But a
plan doesn't always grow as expected, " he says. " If that happened, I explained to
the sponsor that, at this time, we couldn't make the relationship work. I recommended
they look for another plan adviser, and I gave them recommendations. "
* Major interpersonal issues appear. 401k Advisors' Stace Hilbrant has ended
only a few client relationships in his career, usually with over-demanding, underappreciative
sponsors. " It's funny: There are a lot of negatives to having your own
business, but there are a lot of positives, too. And one is that you don't have to
work with nasty people, " he says. " The idea of sitting down with someone every
quarter and being treated poorly? I think, 'Life's too short.' " -JW
need to determine how much time-and staff-it actually
takes to do their client work, sources say. " We do a time
analysis at least annually, and we have a fairly sophisticated
calculator that we've developed internally, " Morris says.
" The calculator is based on time studies we do to track how
long each specific task takes. So, for example, we'll ask our
six relationship managers, 'For the next two weeks, track all
the client work you do, in 15-minute intervals, and record
it in our [Salesforce] CRM [customer relationship management]
system.' "
That shows Bukaty how much time it takes, for instance,
to prepare for a particular client's quarterly committee
meeting. " You track the time as you
do the work, so at the end of the year
you can see how long you spent doing
each task for each client, " Morris says.
" Then you can see things like, 'We
dedicated X extra hours to servicing
that plan during the year.' "
Strategic Retirement Group Inc.
(SRG) has put effort into clarifying
how its team members spend their
time, says David Hinderstein, president
of the advisory firm in White
Plains, New York. But he has chosen
not to track individual employees'
exact hours. " We could count hours,
but that would change the collegial,
collaborative way we work together, "
he says. Instead, SRG estimates time
and costs-i.e., payroll and other
expenses-for each client. " As soon
as you get to the point of counting
hours, " he says, " then you have to
compare individuals, which changes
the team chemistry. "
Renegotiation Approaches
Sometimes, the amount of work the
adviser is doing relative to the fee
the client pays becomes unbalanced,
leading to fee renegotiations. " I think
you have to have a basis for that
conversation, and the best basis is
independent benchmarking data on
the advisory fee, " says Stace Hilbrant,
managing director of 401k Advisors
LLC in Wilmette,
Illinois. His
firm does benchmarking of its fees
with third-party services every year,
relying primarily on data from Fiduciary
Benchmarks (FBi). " If the benchmarking
finds that our fees are too
low, we go to the sponsor and say we
need to adjust our fee, " he says.
" We can say to the sponsor, 'Based
on benchmarking of plans with your
demographics and asset size, the midpoint
fee is $10,000, and we're only
22 | planadviser.com September-October 2019

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