Where Does Your Adviser Get Best Practices?

Chances are they have trickled down from a managing partner study group.

When most retirement plan advisers want to catch up on industry trends, they go to a conference or webinar; but where do the speakers, leaders in the field, get their information? They may belong to a study group.

More or less formal “adviser study groups” have been around for years, and they have likely impacted the way your trusted retirement plan consultants and advisers work and think. One current group was inspired by one of the founders’ fathers, who, himself, belonged to a study group in the 1970s and ’80s. The appeal of the best groups is the same now as then: Top-tier managing partners have a lot more to gain by sharing ideas, best practices, and challenges than they do by keeping such information to themselves.

The ideas they produce may get shared at conferences and eventually work their way through the industry as best practices. Some advisers will pass them on, some will be unaware of them. “There’s a lot of mediocrity out there,” says Daniel Bryant, who began a study group with Jim O’Shaunessey, his partner at consulting firm Sheridan Road. “The industry is changing at such a breakneck pace that our view is tens of thousands of advisers really don’t have a good sense of where the industry is going. They’re literally trying to advise a committee on their asset allocation and provide some really basic retirement consulting services when, at the end of the day, that’s not what the company needs.”

To stay ahead of plan sponsor needs was, ultimately, why he and Shaunessey began the study group, about eight years ago. The partners hosted a two-day retreat, inviting about 20 advisory firm owners, “leaders in the institutional investing consultant space, to come and just talk about best practices where we could all learn from each other. These were people we trust and respect immensely,” Bryant says. “There was no judging, no competitive or professional jealousy.”

NEXT: Advisers working together across firms benefits all 

The fact that all the advisers were at different stages of growth and had different ambitions was irrelevant, Bryant says. Even if a firm was smaller such as Channel Financial and was “growing out a different animal” than Sheridan Road, each had things they could teach each other. This is still true eight years later.

Over that time, they have explored topics such as how to attract and retain great employees; how to leverage technology; customer relationship management (CRM), billing and business oversight; as well as deliverables to a client: What does the client need? What are the tools and things you provide the client? How do you best manage a committee from a fiduciary standpoint? All of these questions are deeply discussed, Bryant says.

The group as a whole has evolved considerably, too—not size-wise but in the scope of resources it offers members. The executive committee meets monthly by phone to debate themes and speakers for group-wide events. These culminate in an annual conference, where industry experts, always including a top ERISA [Employee Retirement Income Security Act] attorney, give legislative and economic updates and talk about trends.

The number of vendors is purposefully limited. Any who come must bring “something innovative, new, something they haven’t tested yet. We’re looking for their top intellectual resources to bring to that room,” says committee member Jason Chepenik, managing partner of Chepenik Financial, and also a founder. Additionally, each member is expected to present an idea to the group. “We all show up with our best stuff, because we want to test it against each other,” he says.

Chepenik calls the annual conference “the most rewarding, impactful thing to my business. I can attend any [event], but I can get far more golden nuggets from six or seven people standing up and talking for 15 to 20 minutes. There’s nothing in it for them; they’re not trying to sell me anything—they’re just talking about an idea that worked for them.”

NEXT: Charity races and community outreach 

One such idea was a charity race Chepenik had begun: the 4.01k Run for Financial Fitness. He shared that with the group after the first was run, in 2015 in Orlando. In 2017, group members will present the race in eight U.S. cities.

Bouncing their best potential strategy off what amounts to competitors seems counterintuitive, but “we really don’t care that we’re sharing some of our secret sauce,” Bryant observes. “That’s the only way a study group works, is if the individuals respect one another and aren’t trying to do an end around.”

“Net givers” is the term Chepenik uses. “You have to be willing to give more than you get back.”

While size and business models may vary in their group, the people “are definitely creative, definitely entrepreneurial, and they want to do the right thing for their clients—they really care,” Bryant says.  

The Revere Coalition, another study group, actually was formed to promote best practices, although its purpose now is to help its members. These likeminded retirement plan advisers—mostly registered investment advisers (RIAs)—work in fee-only arrangements and must have “a business model free from broker/dealer [B/D] affiliation and product conflicts,” says Michael Francis, owner of Francis Investment Council LLC.  

Francis was skeptical when asked to join, about eight years ago. He had belonged to study groups before—the type begun by large financial services employers such as the one he then worked for—groups “dominated by wholesalers” and employer product pitches. “It’s not an effective use of time,” he says. Still, he knew he would benefit if the group was good. “There are many different hats you wear when you run a company like mine,” he says. “It’s easy to get distracted, either just serving your customers or managing your firm, worrying about hiring and firing and profitability, and you lose sight of the industry trends and best practices.”

He was pleased to find peers with whom he had “significant similarities” and could hash out common challenges. “All are trying to do what’s best for the client, trying to compete with the big brokerage firms, the big insurance companies, the big mutual fund companies, and trying to figure out ways to do what we do better,” he says.

To deal with the day-to-day, members often consult with each other by email. “‘I’m looking for a fund company that does this specific kind of fund—anybody have an idea?’” Francis says. And at semi-annual 2 1/2-day meetings, like the other study group, they hear industry updates, and the latest on trends and technology from outside experts and their own members.

NEXT: In the end, clients can benefit tremendously 

Study group members even may find gold—as Chepenik says—in an offhand remark. About five years ago, Francis recalls, “we were talking about our firms’ profitability, how do we serve clients more effectively, more efficiently? One of the guys said, ‘You know, we’re experimenting with getting rid of paper reports.’”

On asking how, Francis learned enough about iPad technology to go back and query his tech specialists about whether that might work for his firm. At the time, he was distributing about eight copies of a report, at $50 to $75 each, every time he attended a committee meeting. “We were going through hundreds of those things every quarter,” he says.

About 20 iPads have since transformed that report delivery model—also winning him extra points with  clients who liked the idea and have adopted it, too. “This put us in a good light, as well: ‘These guys are on the cutting edge—they know what’s going on,’” he says.

While these are specific ideas, the study groups yield broader benefits, too. Bryant largely credits discussions with his study group, and the knowledge he has thereby gained, for “having a clearer vision of where the industry is and where it’s going than [most]. We have a very good handle on where we think our clients’ needs will be in three and four years than where they are today. So we’re trying to obviously provide the services our clients will need in 2018 and 2019,” he says. “Go where the puck is going, not where the puck is.”

Jim McDonald, managing partner, Channel Financial, points to the present “move for aggregation” among smaller, independent shops like his and the advantages a study group such as his can provide. His group brings together “a lot of brain power, [as] most of the folks came from larger corporations. [Membership allows independents] to build and keep their autonomy but still have the advantages that larger organizations have because the group is willing to share these ideas,” he says.

He, Bryant, and Don Stone, director of DC [defined contribution] strategy and product development and senior consultant for Plan Sponsor Advisors LLC, and a member of the Revere Group, all appreciate discussions their groups have had about financial wellness. While creating much buzz, these programs still have a long way to go, they say.

“There are a lot of independent financial wellness programs floating around out there, and everybody’s dipped their toe in and tried a couple,” observes McDonald. “I think those programs are in their early adopter states: There are some good ideas, but the applications still need a lot of development, in both the software and the data that’s used.”

Stone has yet to find a sustainable, cost-effective way to incorporate the programs into the business he does. “And we can’t get a client to pay for it. So we’ve had very interesting conversations with the people who are doing this—how they’ve incorporated it, whether or not they’re getting paid for it, how they’re getting paid for it, is it enough.”

Maybe the largest challenge, McDonald says, is the disconnect between what looks like a good program and the lack of participant take-up. “How do you design [these programs] in a way that, in our short-attention-span society, you’re going to get people to use them?” he says. “We’ve seen advisers go to these national conferences—and [get sold on]  the programs. They’ll go talk to their plan sponsor clients, and say, ‘Hey, you’ve got to get this.’ The sponsor buys it and then discovers nobody’s using it. So they’re like, ‘That was nice—what else you got?’”

NEXT: So how do people join? 

To join a study group such as those discussed here requires fairly intensive vetting. Study groups, once formed, are unlikely to be actively recruiting—the free flow of valued information requires trust, mutual respect and the comfort of all current members. Typically, someone in the group makes a recommendation. In the Revere Coalition, that person then gets discussed and must be approved by all, says Stone, who was invited to join “four-plus years” ago. Members look into reputation and business practices, maybe consulting outside sources; if they turn up issues, the process ends there. Every member has veto power, which may be applied against direct competitors, he says.

Once approved, the person attends a meeting where both sides asses the fit. At this point, if he is not invited back, the reason is probably chemistry, Stone says.

Even when candidates were deemed a good fit and have been members for a while, undercurrents of competition may appear.

Stone acknowledges the necessity for candidness, “but there are still things you are not going to talk about, things you’re not going to reveal,” he says. “The hard part is figuring out how to get up close to that line to be really helpful to the others—and hopefully they’ll do the same for you—without crossing it and giving information you don’t want [a potential competitor] to have. The [problem] is people draw the line in different places.”

He points to a couple of members of his group who are less forthcoming than the rest. “It gets frustrating,” he says. “You have to really push them, and then they’ll maybe tell you something worth knowing. But most in the group are very forthcoming.”

Not all groups work out. Stone helped start one in 2005. After a few meetings and phone calls, it drifted apart. He cites business distractions as a cause. Maybe more so: “There was not enough affinity among the members to hold it together.” Commitment is necessary.

When all the right variables are in play—including “fun,” which all sources mentioned—e.g., “We’ve taken over this cabin [for our annual meeting], and it’s a lot of fun”—the result can be “awesome,” Chepenik says.

For that reason, he and the other owners began inviting some of their second-tier staff to the meetings so they could get acquainted, and potentially learn from each other, as the owners do, Chepenik says. “If you can find a peer across another firm, or if one of my analysts can reach out to somebody in Minnesota or Chicago and say, ‘How are you doing this?’ that too is special.”