What about Research?

My last post I looked into how he tools a Judy Diamond Associates is able to help with your back office support. Specifically, we looked at how Retirement Plan Prospector is able to help with the marketing side of your work. From prewritten dynamic marketing letters to adaptive graphics and presentation-ready plan reports, RPP is able to up your marketing game.

But we all know that preparing for a sale is more than just squaring away your marketing and graphics. You need to know all you can about your lead. Not only that, you need to know how your lead compares to the client you prefer to work with. Moreso, which of the nearly 800,000 plans that are filed every year provide the best ROI of your valuable time?

Advisor Scorecard

Analysis is not just something that looks outward. It also can be turned inward on your own book of business. The Advisor Scorecard helps you to determine and track the plans you currently have under management

After adding their plans in your book of business into your My Plans files, Prospector focuses its analytic tools to help. At the high-level view, you can maintain the general summary of your book of business (Number of Plans, Total Participants, and Assets Under Management). Additionally, you can see the breakdown of the plans under your management by Plan Size and Plan Score.

Plan scores look at the relative strength of a plan. By collecting the plan scores of all the plans in your book of business, you can come up with an average plan score for your clients. Comparing a lead’s low plan score to your “book of business score” is a great use of plan scores. Such a comparison is a data-driven reason for the sponsor to consider having you perform the same great work you did for your other clients.

Here at Judy Diamond, we often find our retail level clients face unique challenges. Frequently these users are the members of small teams, if not the only person at their office responsible for bringing in new business to their firm. Perhaps they are members of a larger firm with dedicated support teams, but others are vying for the resource. Many clients are new to the business. They come to us looking to learn how to sell in this space as quickly as they can.

In the end, each of these groups come to us because they need some “back office support” to meet their sales goals in the most efficient and straightforward path possible. 

What is this “Back Office Support”?

A big challenge for these clients is how to do all the activities required to bring in new business while maintaining their current book of business. Tasks such as:

• Benchmarking analysis
• Determining what plans in a market are weaker than others and explaining these weaknesses to plan holders
• Writing marketing letters for direct or email campaigns
• Creation of presentation-ready reports and graphics
• Dig up information on businesses current plans

I like to call these tasks “Back Office Support”. These are support tasks often provided by knowledgeable staff focused on helping you win over your client. Larger firms often have dedicated departments of experts devoted to these support tasks. However, at smaller firms, these support roles are usually rolled up into the hands of the same person responsible for bringing in the new business. 

With so many tasks falling onto one person, organization and efficiency become even more critical.

Judy Diamond listened to the needs of these clients. We spent two years building Retirement Plan Prospector Plus (RPP+) to do just that: Act as your marketing, graphics, and research departments so that you can walk into your next meeting with everything you need to move along your sales cycle. 

In this series of posts, we will look at how to take advantage of the edge RPP+ gives you. Let’s first look at how RPP+ can support your marketing and graphic design needs.

Marketing Letters

After you know who you want to reach out to, your next step is to decide on messaging. What do you want to say to these leads? How can you get your value proposition across effectively?  When starting a new business campaign, larger firms may bring in assistance from their marketing department. The marketing team often provides two essential tasks to help the salesperson. 

• Make sure the copy, or text, conveys the message the salesperson wishes to send out using the best tone and voice possible. 
• Layout the text in an attractive and easy to read format

While having a whole team of marketers helping craft your messaging is the best way to go, RPP+ can help those whose firm does not have a dedicated marketing team. It can also act as a stand-in for those firms whose marketing teams are unavailable.  

Those who do not have access to a dedicated marketing department can turn to the RPP+ module for support. This add-on module grants users access to professionally written marketing ready for you to use! These letters are not only crafted by our knowledgable team, they are also tied into our powerful RPP+ data. This means the letters pull in plan details specific to the business you are reaching out to. They are also easily downloaded so that you can make any adjustments to the letter (if you wish). 

In no time at all, you have copy ready to be included in your next email or direct mail campaign!

Presentation-ready Reports and Graphics

Often when you are putting together your materials for a meeting with a potential client, it’s a good idea to include graphics. Graphics are a great way to take complex material and make it more easily understandable. Additionally, graphics help pull in clients who are more visual learners. 

However, not everyone has the time or inclination to learn how to create graphics packages of their own. If you work for a large firm, the marketing department might be able to build some charts or format a few graphs for you…if they have time. But even then, you have to worry about collecting the data you need, give it to the graphics expert, explain to them what the data means and how you would want it shown. This would likely take several emails back and forth, plus the additional call or two, to sort it out. 

Our RPP+ module reduces the need for all this hassle by providing attractive and easy to understand charts and graphs ready for our clients to use. If you were want to show your client how Microsoft compares to other software publishers, you can! By accessing RPP+’s Benchmarking tools, you can quickly build a peer group containing software publishers. Then, which a couple 

of clicks, you can generate a graph comparing Microsoft’s Plan Score against over 2,000 other companies in the same market. 

No worrying about collecting data, now worrying about if the graph correctly represents the data. In under a minute, you have a graphic ready for you to drop into your report.

Let’s say you need a heat map showing what states or counties have Software Publishers. Once again, in a few seconds, you can have a graphic pulling on that same data pool of over 2,000 different sponsors. 

But RPP+ goes even further. Not only are we able to provide these single graphics for you, but we also provide each RPP+ client with our presentation-ready plan reports. These adjustable reports pull all the data that you receive with your RPP+ account into a multipage PDF. You get to select what information you want to include in the report. You get to choose

What about Research?

But we all know that preparing for a sale is more than just squaring away your marketing and graphics. You need to know all you can about your lead. Not only that, you need to know how your lead compares to the client you prefer to work with. Moreso, which of the nearly 800,000 plans that are filed every year provide the best ROI of your valuable time?

In my next blog, we will go into how RPP+ can act as your back office Research team providing you with the data you need.

My favorite part of the Form 5500 is the Schedule A. Here’s where we find the meat of health and welfare plans, the insurance contract disclosure and any brokers that sold the policy. Retirement plans will fill out this Schedule as well if they have an annuity contract. But for the purpose of this article, we’ll focus entirely on how to interpret a Schedule A on welfare plans. This article is an introduction, and you can check out its follow-up for building more nuanced searches.

Given how integral it is to either developing broker relationships or assessing competition, there’s a brevity of fields on the Schedule A. Never fear! Judy Diamond Associates has spent years supplementing the data and making connections so that you can work more efficiently and effectively. Below is a list of the most commonly requested data points.

Carrier Name

This is the carrier who is assuming the risk for the benefits selected on the Schedule A. You’ll only see one carrier per Schedule A. Fun fact, sometimes a sponsor name will show up in this field. I take this to mean they’re self-insuring the benefits.

Renewal Date

This usually is identical to the plan year beginning and end date. However, I like to point it out because sometimes you see a policy that ends mid-plan year abruptly. Always worth investigating!

Carrier Benefit Codes

This list of health and welfare benefits was determined by the DOL and has only 13 codes that run through the letters A – M. This is isn’t to be confused with the Form 5500s main page’s Plan Types descriptions (Section II, Field 8a) where a sponsor identifies what they’re offering to their participants. These codes are only for the policy in question and may provide a bit more detail than the Play Types. For example, in addition to the option to select Health a carrier could use HMO or select Health and PPO as a qualifier.

You might have noticed that JDA has 26 codes in their tools. That’s thanks to the next item, “Other” text entries.

The “Other” Text

When a carrier marks code M for “Other” they need to fill out a brief description of what that “Other” benefit includes. That text is searchable in The American Directory of Group Insurance, but we realized early on that it was going to be like hunting for a bent needle in a haystack. That’s because there are no guidelines on how to report benefits. So we created a process to identify the most frequently filed write-ins and created an additional 13 categories just for them. That way you’re not struggling to figure out if Accidental Death & Dismemberment was disclosed as AD&D, AccD&D, Accidental Death & portDismemeberment (that typo is intentional in this article but probably not on the policy), or any other variation you can imagine!

Lives Covered

The number of individuals covered by the policy. Caution, there’s potential for confusion here. The DOL’s instructions indicate on the Form 5500 that participants should be either current or former employees or members of the sponsor. The Schedule A’s instructions say to disclose who is covered by the policy. Some carriers interpret this as spouses, dependents, and participants because their lives covered count exceeds the Total Participants field.

Broker Name

In the fourteen years Managing Director Eric Ryles has been with Judy Diamond Associates, he’s never had a good night’s sleep. Why? Because the DOL has some fuzzy disclosure requirements on brokers. And it’s all thanks to this simple sentence:

What we see on 5500s is that there’s a broad interpretation of how to report that information. Maybe they list the individual but not the firm. Or perhaps it’s the firm, and no individual is registered (particularly common with the larger brokerages). But rarely do filers provide both an agent and the firm they work for.

Fortunately for you, Eric’s restlessness has become JDA’s restlessness. Our dedicated team identifies connections between a broker and a firm and cleaning up data, so your prospect lists and market reports are representative of your search. That’s the core of our BCMS database.

Premiums

This is the value of the contract for the benefits and lives covered. It’s a single-line field with no ability to clarify if the premiums were voluntary or determine how much each benefit on a multi-line policy earned. And yes, you guessed correctly, JDA has identified workarounds to that! Voluntary benefits are typically found on policies with write-in text, and as I mentioned above, that’s searchable. As for multi-line policies, we introduced our Modeled Premiums in late 2018 and continue to build out that model in both Group Insurance and BCMS.

Using 5500 Data for Offensive and Defense Business Development (Part 4): Planning the First Meeting

Meeting with a potential lead is the first big step in winning their business. While personal preference determines the style of your pitch, it is always a good idea to back your pitch with data. Additionally, being able to tailor your pitch to each lead, quickly, is invaluable.

It is also a good idea to present your pitch using multiple modes of communication. While you are going to be speaking your potential clients, remember that not everybody learns or retains information the sale way. For instance, while listening to a speaker may help some, others are more visual learners and react better to charts and graphs. Still others prefer to read the material to listening to a speaker.

It’s a good idea to plan on presenting your pitch to a lead using multiple modes of communication. That way,

PLAN REPORTS

When discussing the future of a lead’s retirement plan, it is often helpful to be able to talk confidently and clearly about the plan’s past. Building a detailed history of a plan will help you show negative trends to a client; trends that you would be able to avoid.

CHARTS AND GRAPHS

Some people learn by reading the material, others, by hearing it. Still, other people best consume data by seeing it. It is important
to provide your lead with the same data in multiple ways. This increases the impact of your presentation and makes complex information more easily understood by your potential clients.

THE VERBAL PITCH

Sometimes even the most seasoned salesperson may forget the importance of their verbal pitch. And there are times that new financial advisors may need a little guidance or inspiration in how to start a pitch. While your verbal pitch should reinforce the visuals of your graphs and the data-heavy details of your reports, it should not be a recitation of these facts. This is where an advisor can reveal how they are able to solve the challenges unique to the sponsor.

THE JDA ADVANTAGE: Our tools are designed to help make your presentation shine. Our Dynamic Plan reports consolidate all our research on a plan into one modular, presentation-ready document. Have all the specific details about a lead’s current plan neatly organized and right at your fingertips.
The performance-based Benchmarking tool in our Prospector Plus creates downloadable professional-looking graphs and charts. By inserting these into your sales deck or pitchbook, you will be able to walk your clients through all the reasons why they would be better off working with you.Need some inspiration? Prospector Plus’s talking points help walk you through a plan’s weak spots. They also suggest different approaches to help your leads understand the challenges their plan contains.

One of the most useful features unique to Retirement Plan Prospector is our Plan Scorecard. The Scorecard allows our users to get a brief overview of the plan’s performance and the areas where there might be room for improvement. The Plan Scorecard also enables you to compare the quality of a plan to another plan quickly and accurately. The overall plan score is created by ranking all the plans nationwide by seven different categories. Once the companies are rated on a percentile scale against each other in the seven different categories, we combine the seven different metrics together into one score with a proprietary weighted formula. We’ll go over the seven different categories and how to use the Plan Score to find and win new business.

The 5 Types of Plan Scores

One of the first things you’ll notice when looking at the Plan Scorecard in Retirement Plan Prospector is that there are five different scores: an Overall or National Plan Score, a State Plan Score, an Industry Plan Score, an Asset Plan Score, and a Participant Plan Score. You can use the different types of Plan Score to see how a plan really stacks up compared to other plans from companies who share the same industry, same participant totals or asset size; in short, their actual peers and the companies they compete with for new business and new talent on a day to day basis.

Rate of Return

The first category listed on the Plan Scorecard is Rate of Return. We calculate this figure by looking at the growth of assets year over year, taking into account any participant contributions or withdrawals throughout the year. While the health of the market overall largely dictates the rate of return, consistent underperformance might suggest that the current advisor is not looking over the investment lineup very closely and adjusting the lineup to provide the best options for the plan’s participants, which you can use as a talking point if you find a plan with a low rate of return score.

Participation Rate

Participation Rate is the second category listed, and it is one of the more important categories on the plan scorecard. The participation rate is calculated by taking the number of active participants divided by the total number of eligible employees. Low participation rate impacts plan performance by capping the total amount of assets invested in the plan at a lower total, which could lead to issues with highly compensated individuals being unable to contribute up to the IRS maximum allowed. That, in turn, could lead to the plan having to issue corrective distributions to the highly compensated employees who go over the limit. Low participation rate can be an indicator of the current advisor not being able to properly educate the employees at the company on the value and importance of saving for retirement.

Participant Loans

Next up is Participant Loans as a Percentage of Assets. Taking loans out of your 401(k) is highly discouraged because of the impact it has on the growth of the participant’s account. The participant loses out on all the potential earnings on the account while paying back the loan on their 401(k) account. A low score on this category can be an indicator that the plan’s participants are not properly educated on the drawbacks of taking out the loans from their 401(k)

Participant Contributions

The next two categories are closely related: Average Participant Contributions and Percent Change in Participant Contributions. Average participant contributions are calculated by dividing the total participant contributions for the year by the number of participants in the plan. This category can be tricky to glean useful information from. Professional offices with low numbers of employees like doctors, dentists and accountants will have higher average contributions than a Fortune 500 company with employees all across the socioeconomic strata. Try looking at the participant total plan score or the industry plan score to get a better idea of how the plan stacks up against its peers. The change in average participant contributions is calculated by looking at the difference in contributions from the year before and the year that the score is calculated. Negative percentages can indicate a number of things from decreasing employer matches to distrust in the current advisor causing the participants to look for alternative investment options.

Employer Contributions

The last two categories are similar to the last section we covered, but Average Employer Contributions and Percent Change in Employer Contributions examines contributions from the employer side of the plan. The average employer contributions are calculated by dividing the employer contributions by the number of participants. A low score in this category could indicate a less generous employer match. A good 401(k) plan is key to attracting and retaining talented employees, so improving a low employer contribution score is very important to both the employer and the employees.

Penalties

In addition to the categories mentioned, penalties have a sizable impact on the overall Plan Score. Some of these penalties include issuing or having a history of issuing corrective distributions, having insufficient fidelity bond coverage and more. Having these penalties show up on the Plan Scorecard indicates poor plan management, and gives you talking points to take into your meetings with prospective clients.

Using 5500 Data for Offensive and Defense Business Development (Part 2): Finding Your Target

Now that the east coast is covered in snow, it’s the perfect time to continue my series on Prospecting the Federal Form 5500, this time focusing on how to find the targets you identified in the first post of this series.

With hundreds of thousands of plans out there, it can be hard to find those plans that are right for you to reach out to. Instead of spending time, effort, and even money contacting leads with little chance of conversation, you need to focus your attention on leads that would be more receptive to your approach.

WHAT ARE RED FLAGS?

Red flags are a series of indicators the experts at Judy Diamond Associates identified to aid in locating “in trouble” plans. These red flags not only identify a potential issue in a plan, they also act as tags which can be searched for. Which 19 separate Red Flags to choose from, it is easy to tailor one’s research. Included in our red flags are:

• High Average Account Balance
• Corrective Distribution Issued
• Insufficient Fidelity Bond Coverage
• Highest Admin Fees

For more on our red flags, check out Michael Iapalucci’s outstanding new series focusing on our Judy Diamond Associate’s red flags.

PLAN SCORES

Knowing how a plan stacks up against other plans in a state or industry can be critical in identifying trends in your market. Therefore, having access to tools that quickly aid in plan comparison is a must! Plan scores provide you with seven metrics by which a plan can be compared to other plans. Additionally, JDA includes an overall umbrella score for a more high-level analysis. These scores help you understand the landscape around the plan so that you are better able to develop your pitch, or guide your business development efforts.

ADVANCED SEARCH

Now that you know what your current clients look like, you can use the advanced search feature to find other companies that match! This may seem a challenge since there are over 450 fields of data in a 5500 form. There are many options including Participant or Asset Total, to specific Red Flags, to Broker or Vendor Names. However, the advanced search box allows you to quickly narrow the field of leads from hundreds of thousands to a more manageable number of perfect leads.

PERFORMANCE BENCHMARKING

Knowing how a plan performs against other plans very helpful. It is a good idea to research a plan to determine if they really are a good lead for you. Performance-based benchmarking is a great way to accomplish this. Identifying a plan that historically underperforms plans in your region or your own book of business helps you focus your attention.

THE JDA ADVANTAGE:

These are just a few of the tools within Retirement Plan Prospector Prospector Plus tool designed to bring the experience of the JDA Team to your office. These tools are easy to learn, quick to use, and, most importantly, they provide results. There is a reason our clients stay with us year after year.

In this post, we are going to focus on one of Judy Diamond’s proprietary data points – Red Flags and how to use them in prospecting.  Red Flags are an innovation pioneered by JDA based on 30 years of experience with the Form 5500.  The idea behind Red Flags is to identify retirement plans that have a noteworthy characteristic that is not entirely obvious.  While many of the Red Flags point to potential problems, whether it be with performance, plan design or administration, this is not always the case.

There are nineteen Red Flags identified as important relative to prospecting.  Over the coming months, we will focus on one or more of these flags to provide a more detailed explanation along with some tips on how to use them in your practice.  For a complete list of the 19 Red Flags, click here.

The first Red Flag we will consider is High Average Account Balance.

Most Frequently Occurring Red Flags

High Average Account Balance

High Average Account Balance is the most widely occurring Red Flag showing up in 401(k) plans.  This accounts for nearly 200,000 plans in the 2017 plan year.  This is not surprising considering the median number of participants (10) and the median participation rate (100%) for plans with this flag.  So what is going on here and is it good or bad when focusing on prospecting?

High Average Account Balance is an example of a Red Flag that can be considered a positive screen.   This Red Flag helps to find plans with few participants and participants with a higher than average 401(k) balance.  The average 401(k) balance is $106,000 according to USA Today.  Plans tagged with High Average Account Balance in the JDA Retirement Plan Prospector database have a median account balance of $182,778 – a staggering $77,000 more.

What Types of Plans Have this Red Flag?

What types of firms make up these plans?  Physicians, Lawyers, Dentists, Financial Advisers, and other professional services firms comprise the majority of these plans.  This includes wealthy professionals with small group practices or partnerships that are able to save the maximum in their retirement accounts.

Knowing how to find these types of plans can be helpful in two ways.  First, the business owners and participants are one and the same with these plans. As a result, it is much easier to get their attention regarding plan design or performance issues.  Therefore, whether it is high fees, poor fund selection or performance, you should be able to make a strong case to one of the business owners that it is in their best interest to meet with you.  Secondly, these companies and individual participants are not only valuable retirement prospects but can also be targeted for wealth management services.  As a result, since there are so many plans with this flag, it is relatively easy to find them in most geographic locations.

In future posts, we will take a look at some of the other most prevalent Red Flags.  These include Bottom 10% in Employer Contributions and Insufficient Fidelity Bond Coverage.

Using 5500 Data for Offensive and Defense Business Development (Part 1)

This article is the first in a five-part series devoted to helping you more effectively use the 5500 for prospecting. By the end of this series, you will learn:

• Steps to locate viable new business
• Defense strategies for your book of business
• How to approach your first meeting with a potential client

Identify your Clients

There are over 1 million ERISA qualified plans active nationwide each year. Nearly 800,000 plans in the retirement space alone. Finding the plans that fit well into your business model can seem like a daunting task. The first step in business development is often research. Here are 3 questions to ask yourself:

Who Are My Current Clients?

Knowing who you currently work with is a great indicator of where you should be looking for new business. Consequently, as no one knows your client’s as well as you, it is always a good idea to dig deeper and see if there are unifying traits that you may not be aware of. The 5500 form provides a ton of information that, when analyzed, can reveal trends and traits that may not have been uncovered by your face-to-face interactions.

What Are My Strengths?

Properly identifying your skill set is imperative when planning your prospecting. Perhaps you are a good educator and skilled at letting employees know the value of their plan. Maybe you are a data wonk and are skilled at identifying trends in large pools of data. You may have spent years in the 401(k) market and are known in your region for strong 401(k) performance.

Who Looks Like My Current Customers?

A good place to start are those categories of sponsors that are similar to what you work with and blend well with your strengths. Therefore, if you can find sponsors who resemble your client base, sponsors that also may have an unhealthy plan, you have yourself a beginning of a great lead list.

THE JDA ADVANTAGE:

The Retirement Plan Prospector database was designed not only as a lead generation service but as a tool to help you identify trends in large datasets.

Find the second post in this series Here!