Wholesaling the product...

October 24, 2013

This third alert on themes revealed in advisor interviews is about product. Specifically, how well wholesalers know their product. 

In a recent series of win/loss interviews on wholesalers, the third theme we heard over and over again was poor product knowledge. This is amazing to hear. A basic fundamental of wholesaling is to know your product, cold. Over 85% of the advisors we interviewed report they are visited each year by a wholesaler or wholesalers that don’t sufficiently know their product or service offering. In fact, half of these advisors estimate at least 25% of the wholesalers who call on them don’t know their product.

When we hear this we ask if they bring a degree of value to the meeting. Most advisor’s responded with just another sales-spin. Advisors are looking to their wholesaler as a reliable resource of product knowledge, regulatory knowledge and as a liason with the home office. In other words, they want smart wholesalers who fulfill their commitments, and act as a resource. Wholesaling is too expensive to be sending out the underprepared. 

A Key To Success

October 15, 2013

Today many contemporary personality psychologists believe there are five basic dimensions of personality, often referred to as the “Big 5” personality traits. Each of the five personality factors can be measured. Current theory utilizes a range between the two extremes of each attribute. Scoring at either pole is not necessarily a good thing. But having high levels of one specific trait can indicate higher probabilities of business success. 

Pulse Logic’s research of wholesalers and advisors has also revealed the commonality of high levels of the same dimension among both the successful advisor and wholesaler.  

Conscientiousness is this underlying trait of success. It includes high levels of thoughtfulness, impulse control, and goal oriented behaviors. These lead to being organized and mindful of details. Advisors repeatedly tell us traits tied to conscientiousness are vital to developing a good working relationships with wholesalers.  They tell us behaviors such as follow up, listening, seeking to add value, demonstrating an interest in helping the advisor’s practice, integrity, etc. are lacking among wholesalers in general. But, they are vital when choosing who to work with.

Showing Up

October 07, 2013

In the next four Pulse Logic Alerts, I’ll share with you four recurring themes we hear from advisors. These topics come up most frequently when doing win/loss studies of wholesaling. None of these points made by advisors are new. In fact each is timeless. Their simplicity will have you asking why advisors are even bringing up these topics. In response, they tell us wholesalers and wholesaling organizations too often lose focus on what really matters.

The first and foremost advisor request is that wholesalers “show up.” Sounds pretty simple, right? Not so.

Good wholesalers show up and add value. Real value, not the sales spin of the day. Advisors tell us the following. Leave the glossy brochure in the bag. Ask questions, understand the advisor’s business and where the wholesaler can add value. Then, offer value if you have it, if not, look into ways of adding value and get back to the advisor. This is the first step. The second is to keep showing up.

Advisors tell us the wholesaler probably won’t immediately get a sale showing up the first time. But chances are they will if they continue to stay in touch and strive to help the advisor’s practice. The average sale for a wholesaler takes five meetings. Advisors tell us the best way to stay in touch is not just in person, phone and email. More and more are reporting texting works just as well.

Stormy Seas

August 26, 2013

I’ve been reading a lot about a Yale professor being a disruptive squall on the sea where the retirement plan industry ship sails. Pundits and industry leaders have accused him of using inaccurate data, and unnecessarily upsetting plan sponsors of possible fiduciary breaches. While all this hand wringing continues, it seems the opportunities this presents to plan advisors has been overlooked.


First, this uproar is focused on letters the professor sent to plans alleging they have chosen to bear excessive fees. While perhaps alarming, this presents an opportunity. Advisors can meet with their client to reenforce and bring clarity to the reasonableness of fees the plan and its participants bear. Rather than letting plan sponsors be the victims of the hysterics, advisors can clearly outline the fees being paid and benchmark those fees against similar plans. This will provide the assurance plan sponsors seek.


Second, if the advisor hasn’t already, it presents an opportunity to outline the roles and responsibilities of the plan’s vendors. This will not only insure there are no redundancies or gaps, but also reenforce the value each vendor is providing.


Third, every year is a good time to revisit the plan’s goals and the resultant metrics used to determine if the plan is meeting its goals. By doing so, it keeps the plan sponsor focused on the plan mission and road map to meeting those goals. Only by establishing plan goals and metrics can the sponsor accurately examine if the plan is a success and the value each vendor provides.


Fourth, and possibly most important, once the plan goals, metrics, road map, and administrative procedures are established, the advisor can conduct periodic reviews of plan vendors. This due diligence will insure the plan is receiving the best value from each vendor.



As usual, when the wind blows and ship tilts, left in the capable hands of the plan advisor, the ship will right itself and sail on.

Own It

August 09, 2013

A friend and very successful business colleague told me when I started my own business, “don’t rent it, own it”. What he was referring to was having control of the vital components of your business. For example I own the software and data behind Pulse Logic’s web based benchmarking tools. They are part of the business’s critical intellectual property.
Many plan advisors see their business in a similar manner. Here’s an example: in a recent Pulse Logic survey, 80% of plan advisors indicated they have not used any of the prepackaged fiduciary programs available through many recordkeepers. Further 85% indicated they either will not use them in the future or if they did use fiduciary programs, it would be for less than half of their clients. But in the same survey, 60% said given the opportunity to have investment discretion at both the plan and participant level with an outside recordkeeper, they would implement it with most if not all of their clients.
These responses send a strong message. Advisors are not ready to turn over investment discretion to a third party. Whether it’s a lack of trust or loss of control, 60% clearly indicate investment discretion is a critical skill they bring to their clients. When clients are holding them responsible, they want to own it.

How Geography Influences Advisor Fees

July 31, 2013

Since releasing our Plan Advisor Service and Fee Benchmarking tool almost a year ago, the question if geography has any bearing on advisor fees frequently arises. More specifically, there appears to be a general assumption that the fees advisors charge in high cost of living (HCofL) states are greater than those in non-high cost of living (NHCofL) states.

As many of you are aware, the plan advisor service and fee benchmarking tool is a product of our on-going advisor survey work. In the first half of this year, we accumulated over 350 unique advisor service and fee survey completes. All are from advisors who have at least 10 plans, and $10 million of plan assets under management, and consider qualified plans to be among their top three business lines.

Segmenting these advisors as either residing in HCofL or NHCofL states, allows us to examine if in fact geographical differences do exist. HCofL states included, but were not limited to  Massachusetts, Connecticut, New York, New Jersey, and, California. In order to insure we were comparing fees appropriately, we had advisors translate their fees into basis points as a function of total plan assets.

What we found was that there is no significant difference between the fees advisors charge between the HCofL and NHCofL groups. But, the analysis did reveal one possible subtlety: it appears that advisors in some NHCofL states may actually charge more and provide less services. Stay tuned as we continue to accumulate and analyze advisor data.

With Conviction

July 15, 2013

A couple of weeks ago, I played in a golf tourney. Our foursome was made up of our club golf professional, two fellow members of our club and myself. Luckily, we were able to walk and take advantage of course’s caddie program. My caddie, a high schooler, played on her school team and carried a very low handicap. Realizing my good fortune, I began to ask her to help read putts which she proved very adept. On one particular short but undulating putt, after some careful examination, she finally said, “Back of the cup with conviction.”

Why am I sharing a golf story? Bear with me.

We recently asked advisors how their broker dealer/RIA or product providers could help to grow their qualified plan business. We provided a comprehensive list of solutions collected from prior surveys and advisor interviews. The two most popular answers by a significant margin were a marketing plan to grow my qualified plan practice and a guide to help me determine my service offerings and the appropriate fees for those services.

Next, we asked the advisors to rate their responses on a scale of one to five. One indicated it wasn’t important to their business and five indicated that it was vital to the success of their business. Only, eighteen percent said a marketing plan was vital, while a remarkable 42% indicated determining the right services and pricing to be vital. 

We ask ranking questions to understand the conviction of answers. While both a marketing program and service and pricing guidance were the popular answers, it’s clear when the advisors were asked to rank relative importance where the conviction lies.

And, yes, I made the putt.

Used To Be

June 07, 2013

I can remember whenever someone started a sentence with “used to be”, we assumed the speaker (probably a father or grandfather) meant at least 10, but more likely 20 to 30 years prior.  At the mere mention of this phrase, my brothers and I would always roll our eyes and groan.

How times have changed.

A client recently asked me to compare how plan advisor fees have evolved in just the last two years. We started by looking at our data on the advisor served retirement plan marketplace. We graphed the frequency advisors utilized an asset based fee schedule and a flat dollar arrangement against plan size. We always assumed that someday at a specific plan size, using a line graph, the lines would cross. Thus, indicating more advisors were now utilizing a flat dollar fee schedule than an asset based arrangement above a certain plan size.

Just two years ago, data told us it never happened no matter how large the plan.

“Used to be” in this case only means two years. Today on this line graph, the fee schedules cross. Beginning at the smallest plan size and moving upward, traditionally the majority of advisors report using an asset based fee schedule. But, now the lines intersect at the larger end of the spectrum.

If this trend continues, this cross point on a line graph will continue to move to the left, toward smaller plans. It’ll bottom out at the point where flat dollar fees become cost prohibitive based on plan size. But, stay tuned as we watch the equilibrium float downstream.

The Advisor On Practice Disciplines

April 22, 2013

Recently, we asked plan advisors to identify the practice management disciplines where assistance would be most beneficial. Their responses primarily focused on developing a business plan, creating a marketing plan, improving internal practice operations, producing sales collateral, and providing service and fee guidance. Advisors indicated almost universally that each would have a level of benefit. While not a surprise, it did affirm elements of our prior work on practice management.

In this study, our next step was to ask each advisor the importance of each discipline by ranking them in a five point scale where one indicated the highest level of importance and five indicated little if any importance. The average rankings for each discipline did not significantly differ. But when we looked at the distribution of responses across the one to five scale, the results became very revealing. 

Here’s three facets of the plan advisor landscape we revealed:

-All advisors felt that service and fee guidance was important.

-The practice characteristics of advisors ranking operational improvement as most important differed significantly from those ranking a marketing plan as most important.

-Close to a third of plan advisors ranked internal practice operations as the most important discipline where they need assistance. 


March 27, 2013

A funny thing happened when the 408(b)2 meteorite struck the the retirement plan planet. In advance, the pundits, scribes, and oracles predicted a catastrophic realignment. Plans’ recordkeepers, investment managers, and advisors would be in peril. Everyone scrambled to be in compliance. Countless hours and dollars were spent. When it landed, instead of sending shockwaves across the landscape, a faint thud may have been heard.

We waited for angry plan sponsors to call, email, or demand a meeting. But, perhaps something else occurred. Studies are beginning to indicate an increased demand for the services of the plan advisor. A recent series of Pulse Logic advisor interviews revealed increasing advisor optimism. Several advisors stated their business has picked up. One summed it up when he said, “Along with the heightened awareness of fiduciary and regulatory obligations, plan sponsors are realizing they need help with 408(b)2 and 404(a)5. These are presenting great opportunities for the specialist plan advisor.”

Perhaps that wasn’t a meteor, but a seed of growth...

Motivating the Advisor

March 20, 2013

Have you ever thought about what motivates an advisor? Money, right? Well not so fast. If the advisor is struggling to pay his or her bills, it’s money. But if they’re successful, are their other motivators?

The old theories tied motivation to money. Recent behavioral studies have shown that money works on relatively simple tasks. Such as the more trucks you can unload in a day the more money you’ll make. But when it comes to complex problem solving tasks, the motivators change. When large bonuses are on the line, studies have shown that people with complex problem solving tasks tend to take short cuts and deliver an inferior product.

Here’s an example. In the 1990s, Microsoft set out to develop a product, Encarte, that would replace the encyclopedia as we knew it. They assembled a team and promised substantial bonuses for a superior, paradigm shifting product.

Shortly thereafter a community of internet users formed and developed a tool that eliminated Encarte. Were these folks paid substantial sums of money? No, in fact they were all volunteers. Wikipedia is a product of a community. It unknowingly tapped into three primary motivators: autonomy, mastery, and purpose. Participants clearly operated autonomously, worked to master the art, and had a clear purpose. 

Perhaps we're ready for a new approach.....

Wack A Mole

March 14, 2013


Have you ever seen the game “Wack A Mole?” It’s a game where contestants hit a mole poking out of a hole only to have another pop up from a different hole. An often repetitious and futile game with no end and really no winner. It’s a game that can certainly reflect life and clearly poor business decisions. 

 Retirement plans can be a very complicated sum of multiple moving parts. Often, they can be very confusing to the small employer trying to offer a benefit to loyal, hard working employees. 

 In a recent article, an industry pundit suggested plan sponsors identify problem areas with their plan and hire an advisor who will solve those problems. This strikes me as a bit of “wack a mole.”

 Our studies have consistently shown that the most successful advisors approach their clients with a well considered, comprehensive basket of standard services. This approach more often than not will resolve the sponsor’s issues while providing the necessary expertise to prevent other endogenous issues from popping up. Unless a plan sponsor is in a position to hire multiple advisors, a panoptic approach will serve them best.


Does Geography Matter?

March 05, 2013


Thomas Freeman, New York Times columnist and author of The World is Flat and Hot, Flat and Crowded, has told us the world is flat and getting smaller (metaphorically). Using rational economic theory based upon a flattening and shrinking world, one can assume in the qualified plan space the geographic influence of fees should be diminishing. With many plan advisors using basis points to denominate fees, we’ve found for the most part a general leveling of advisor compensation across geography.

But, we have found third party administration remains a regional business. TPA fees are typically tied to participant count rather than assets. The market they serve tends to be regional with few clients beyond a handful of local states. Almost all TPAs have been in business at least 20 years. Maintaining their existing block of business at existing or previous fees is of greater focus than growing the business with competitive fees.


How the Plan Advisor's Business will Change

February 15, 2013


As we look into the future, we see the emergence of four significant trends in the advisor served qualified plan marketplace. 

The first is a product of the remarkable shift to service agreements and fee based compensation. This migration has left the advisor served qualified plan market in a state of redefinition.  Advisors report a lack of market clarity in determining their offerings and fees. Natural market evolution suggests this will sort itself out over the next three to five years, the usual cycle for plans to review their service providers. But the result of this sorting process may be painful to a number of established plan advisors. Our on-going advisor service and fee studies indicate younger, hungrier, and tech savvy advisors are beginning to push advisor fees down. In addition, many advisor firms are achieving the scale to drive down incremental costs and streamline their services. As a result, many established advisors will struggle to compete at reduced compensation levels. The burden of existing overhead and less efficient operations will cause many of these practices to lose market share.

Closely related to the first market shift, will be a move to more professionally managed advisor practices. Pulse Logic has found that less than 20% of advisor practices develop business plans, understand their cost to acquire and service a customer, or have developed and executed plans to cut costs and improve operational efficiency. However, we’re beginning to see the formation of new advisor practices. The commonality of these practices is a very accomplished management team looking to leverage expertise and scale to gain significant market share. Their focus is to reduce fees, provide a very professional level of servicing while streamlining operations to cut costs and gain scale.

We  have seen remarkable change in the evolving population of North America. For the first time ever, the minorities in aggregate exceed half of the population. This changing face of America will lead employers to demand more from their advisors. They’ll look for advisors to develop and deliver participant programs catering to specific cultural segments rather than simply translated presentations and materials.

The final change we see on the horizon is the continued rise in plan benchmarking. While advisors, providers and consultants have developed various methods to benchmarking plans, the market lacks any standardized or universally accepted methods. This fragmentation has led to a plethora of methods and metrics to a gauge a plan’s success without widely accepted standards. In the coming years, nationally accepted standards will emerge similar to the indices of the financial markets. These standards will begin to provide plan sponsors with a very clear picture of their plan’s success, the value of their advisor, how their plan compares to other plans and their competing employers.

The Race To Zero

December 11, 2012

Recently, I heard some very prosperous plan advisors discuss their success.  Their practice’s each service a significant block of business and all of them clearly have winning formulas that have worked very well in the past.

But what I heard wasn’t necessarily spoken. Let me be more specific. Each of them discussed losing a long term client in the last month or two. Each lost their client to a younger advisor who was willing to do the same or more work for less. Each took a principled approach to the loss, stating how important it was to put a stake in the ground and not budge on fees.

It’s not news that we live in a dynamic world whose pace of change will only accelerate. But what is remarkable is that in order to avoid the race-to-zero, we have to always seek ways to add value and distinguish ourselves from others. Our research has shown that over the last 12 months, four new advisor services have emerged that command consideration. Each addresses plan sponsor needs that either did not exist or seemed insignificant a year ago. All the while during this past year, advisor fees have continued to evolve into much tighter spectrums. 

Twenty years ago we heard the battle cry: “faster, cheaper, and better.” That’s a principal where I’m willing to put a stake in the ground.



Advisors on the Same Old Same Old

November 07, 2012


Financial service wholesalers and their managers spend an inordinate amount of time developing tactical solutions to avoid the dreaded malady of wholesaler sameness. Searching for the new sales pitch or spin to gain advisor attention is an on-going process similar to a gerbil on the running wheel. While this never-ending cycle of pitch and spin continues, perhaps some sameness may work to a wholesaler’s advantage.

 Pulse Logic studies on wholesaling demonstrate the newest sales ideas and latest pitches to be generally ineffective.  Successful advisors more and more frequently limit wholesaler access to their practice. Most often these advisors report wholesalers lack value-add and a desire to understand their practice while proving to be unproductive meetings. When asked to specify attributes of their preferred wholesalers, advisors overwhelmingly picked traits such as integrity, accountability, knowledge and reliability. While not necessarily the most exciting characteristics, these habits suggest a level of sameness to be an element of success.


Physics and the Plan Advisor

October 10, 2012


Conversations with plan advisors often reveal similarities between physics and the social science of human behavior. Frequently cited as inertia, an object at rest will tend to stay at rest, i.e. remain unchanged. This concept of inertia can often be seen in advisor behavior. In the retirement plan business, advisors are usually willing to look at new platforms and recordkeepers, but they continue to place business with one or two familiar providers.

Our work has found this inertia to be a product of the following:

-the commoditization of product has eliminated significant enough features and benefits to cause change

-the rising sophistication and independence of the advisor has led them to take a more unbiased approach when determining what’s best for the client.

-more and more, advisors have developed their own alliances to provide an offering where they retain greater control

The bonds of inertia can be broken and advisors will change. Our work has demonstrated it happens in two ways: a disruptive exogenous force or an evolutionary process. Studies have shown that while providers cannot control the disruptive events, they can influence the evolutionary process very effectively. 


Advisor Conversation Tidbits

September 19, 2012

In our on-going studies of retirement plan advisors, we talk to at least 10 each week. It allows us to keep abreast of the marketplace, identify trends, and monitor the continuing evolution of the advisor. One of the topics we frequently explore is wholesaling from the perspective of the advisor. As plan advisors continue the rapid migration to fee based business and their field becomes one of specialists, it appears wholesalers may not be keeping up.  Here’s a few revealing tidbits we’ve been hearing recently when the topic of wholesaling arises:

-leave the glossy brochures in the bag, show up with a pad of paper and pen

-there’s a reason why advisors limit the times wholesalers can see them

-there’s a growing focus on the participant experience

-the more sophisticated the advisor, the more they look beyond the product to the people who will service their client

-advisors are looking for advocates not slick, chiseled, beautiful wholesalers




TPAs on Wholesaling

August 29, 2012


Having just completed our second study of wholesaling from a TPA's perspective, we'd like to share some interesting tidbits:

-More TPAs are limiting the times wholesalers can come to their offices to meet with them or their staff

-The TPA's expectation of a wholesaler to introduce advisors has fallen

-Conversely, the TPA's expectation of the wholesaler to influence advisors to use their services has increased

-TPAs rated wholesaler influence at three critical milestones of the sales process significantly lower than a year ago

-There is a significant divergence between the way the TPA judges a wholesaler and how the advisor evaluates a wholesaler

-The roles of the wholesaler and the relationship manager remain a mystery to many TPAs

Not surprising, the TPAs' overall satisfaction with wholesalers has fallen. But, the responses demonstrated a consistency:  a marked difference in the advisor's and TPA's  expectations of  wholesaler remains.