As successful and focused defined contribution retirement plan advisers continue to grow their businesses at a rapid pace, they logically look to hire salespeople to take advantage of the many opportunities coming their way. With 500,000 DC plans between $250,000 and $100 million that either do not have an adviser or use one that has fewer than five plans under management, the opportunities are robust. And with only 5,000 "elite" DC advisers with at least 10 plans, $30 million and three years' experience, and 1,500 "super elite" advisers with 25 plans or more than $100 million, the competition is thin. So hiring more sales people makes sense, right? Not really.
In most successful DC practices, the principals have sold and sourced 95% of the deals, if not more. While there has to be a team effort to be successful, especially for mid- and large-market plans, the principal is the one driving and closing the process. Other people can make the appointment, prepare for the meeting, follow up on the meeting and service the plan, but only the principal can be the main person at the initial and succeeding meetings until the deal closes. Think about it: If another person in or outside an adviser's organization is really capable of sourcing and closing a deal, why would they work for someone else?
Though creating a successful DC practice is no easy feat, it is not rocket science and does not take vast amounts of capital. It takes a lot of nerve, technical capabilities and really good sales skills. While some industry pundits predict there will be fewer DC specialists, more likely the number will grow from 5,000 elites to 10,000 over the next five years to take advantage of the many opportunities.
So if hiring a successful salesperson is not a viable, or at least easy, solution, what are the alternatives? One choice that almost never works is hiring your local, friendly wholesaler and putting them in the role as rainmaker. First, they get the luxury of having a big brand on their card; second, their idea of sourcing deals is to call advisers to see if they have any plan opportunities. Put them in a room by themselves with a list to cold call, and you will hear strange sounds but very little production emanating.
The real solution is to partner with or buy another practice where the adviser may have been somewhat successful, but needs help either to grow or move up market. In either case, neither party will or should consider a new salesperson. Advisers who can really sell, which is generally only proven by success, are not hirable. Banks learn this hard lesson over and over again.
Short of partnering with or purchasing another practice, which has its own set of challenges, advisers should ensconce themselves with support people who are able to leverage their time and expertise and never outsource the critical parts of the sales process. Principals must cultivate and maintain relations with centers of influence as well as make the first and subsequent meetings until the deal closes. Marketing, technical and sales support people can leverage that principal, and advisers might even be lucky enough to find someone who can make their own sales. But if they do find that one-in-a-million adviser who can generate business on his or her own, they need to be prepared for them to start their own practice very soon, unless they are made a principal.
Barstein is the founder and executive director of The Retirement Advisor University at the UCLA School of Management Executive Education. Reach him at
