Competing with Starbucks / Franchising of 401(k) Advisory Services

Imagine you own an independent coffee shop and Starbucks offers you a franchise with no upfront costs and a healthy revenue share going forward. Well, you could continue to figure out where to buy your napkins, how long to roast the beans, and a thousand other operational details, or you can implement a proven business model where much of the marketing, operations, and client deliverables are handled for you, and share a portion of your increased revenue.  I never owned a coffee shop and prefer to frequent small independent businesses, but I suspect it is hard to compete with a Starbucks.  

I believe there is a direct parallel with what is happening among independent retirement plan advisory firms.   Many 1- or 2-advisor shops are now joining larger networks of advisors who share a strong brand, have access to deep resources, and offer centralized back-office support.  In becoming a “franchise” of the larger firm, they are able to focus more of their own time on sales and meeting with clients, and now able compete effectively for larger plans.  According to Jeff Cullen, Managing Director of Strategic Retirement Partners, "As retirement plan advisors, we have a freight train coming toward our industry.  Achieving size, scale, and being part of a team, is more critical than ever to not only growing a practice but also survival."   

In years past, generally it wasn’t hard to pass Series 6 and 63 exams and hang out a shingle as a 401(k) advisor.   Many plan sponsors chose their advisor based on personal or other business relationships.  While relationships will always be important, plan sponsors are now much more aware of their own fiduciary liability for the prudent management of their employee retirement plan, and not so ready to do business with their insurance agent or golfing buddy unless he or she is a capable and experienced retirement plan advisor.  The DOL is also doing its best to ensure that advisors, broker dealers, and other providers embrace their fiduciary accountability when doing retirement plan business.

RPAG supports hundreds of focused retirement plan advisors.  Many of the most successful advisors are now being selected based on the quality of their analysis (of investments, plan design, vendor fees and services), the fiduciary guidance they provide, and increasingly on their measurable impact on participant retirement plan outcomes.   

It can be especially hard for a small shop to compete for larger plans, which may require a team selling approach.  Plan sponsors may worry, “What happens if Joe gets hit by a bus?”  You may also need a CFA or ERISA specialist at the table. 

To be solid and efficient in all areas requires robust systems and a knowledgeable support team.  The question is whether to develop it yourself or partner?  You can hire and train, and hire and train again when that person leaves (and continue to focus on what to call your vanilla low-fat soy latte), or you can join an elite team of retirement plan professionals and spend more of your time where you add the most value - meeting with plan sponsor clients and prospects, and building your business. 

To discuss ideas in this article or if interested in joining a strong team of retirement plan specialists, please contact or 707-861-9272.  

Written by Fred Greenstein, Director - Business Development for RPAG and Kestra Financial

ACR#214137 10/16

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with any entity listed on this document.  The opinions expressed in this article are those of the author and may not represent the views of Kestra IS or Kestra AS.
This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects.  It is not intended to provide specific legal, tax or other professional advice. 

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