Rolling in rollovers

By Jason Kestler

Kestler Financial Group, Inc.


Leads — People fail in our business without them; people change allegiances because of them; and they can make or break your professional career.

What is your definition of a lead? Is it a name in a phone book, or is it someone sitting across from you with an open checkbook? The most successful producers have multiple, consistent programs to generate a constant flow of leads. But, unlike the old paradigm of a “funnel” into which “suspects” enter the top and eventually become “prospects,” successful producers see their lead program as a “pipeline.” They maintain multiple pipelines that contain prospects from various markets and in various stages of development. The difference between a funnel and a pipeline is that every prospect in a pipeline has been specifically identified as “qualified” for a specific sales process — college planning, buy-sell, retirement planning, etc.

A key concept in economical lead generation is to know precisely what it costs to get face-to-face with each client. Let’s assume you choose to use seminars. You send out 5,000 invitations at a cost of $3,500. Follow-up calls and confirmations cost you $200. Meals and room rental cost you another $1,300, for a total cost of $5,000. Assuming you confirm 100 attendees and schedule appointments with half of them, your cost per appointment is $100 ($5,000/50).

Let’s take another example. Assume you choose to market using direct mail only. You send out a 5,000 piece mailing at a cost of $3,500. If you get a 1 percent response (50) and you schedule appointments with half of them (25), your cost per appointment is $200 ($5,000/25). Although the expense was less, the “cost” was twice as much.

There is an important point to acknowledge here. If, after investing this money, you are not capable of actually closing a sale, all is wasted. Good leads can never overcome poor technique or lack of knowledge.

As you can see, the objective is to acquire the most qualified prospects at the least possible cost. Allow me to introduce you to what may be the largest untapped lead source in the history of our business. The first wave of baby boomers has begun to enter retirement, and over the next 18 years, 76 million baby boomers will reach retirement age. This is the first generation in history to have had access to a 401(k) throughout their entire working career. With over a trillion dollars invested in retirement plans, these retiring boomers are ideal prospects.

The problem is, how do you find them economically? In Loudoun County, Virginia, alone (where our office is located), there are over 400 defined contribution plans (401k) with over $800 million in assets! That’s a big number. But, unless you are a pension expert, your chances of getting at these dollars are slim. However, those same 400 plans made payments to participants in excess of $74 million. This money goes to retirees, terminated employees and beneficiaries. And, almost all of it goes into an IRA or new employer’s 401(k) somewhere. Are you getting your fair share of the rollovers in your area? The vast majority of 401(k) rollovers captured by insurance agents are accidental: the person attended a seminar at the right time, saw an advertisement in the paper, or cruised the yellow pages.

Accidental prospecting
When asked why he robbed banks, Willie Sutton replied, “Because that’s where the money is.” If you knew how much money each 401)(k in your area was hemorrhaging each year, wouldn’t it make sense to begin a “pipeline” to capture these distributions before they hit the street? to help you with case design.

What’s the down side? You have to be willing to work the system. A pipeline isn't magic. The upside, however, is that, over time, you become known as the rollover and retirement income expert in your area, not only with the general public but with those who will be a direct influence to rollover prospects at the most important time.

Positioning yourself as the rollover expert in your community is important for obvious reasons, but there is also a more subtle benefit that is often overlooked. We and our peers have positioned ourselves well over the years as asset gatherers and asset accumulators. Very few advisors are recognized — or for that matter, qualified as — distribution experts.

Now, let’s analyze the cost. Let’s assume you identify 100 employers in your area who have a regular history of distributions (Cost $0). You then begin a systematic “drip” program to educate and inform the HR specialist (Article cost $0; mailing cost $.50 each). If you only receive one referral a month, your cost per very qualified lead is $50.

Think about it. For the last 30 years, the focus of the baby boomers has been accumulation. The financial services industry has built a myriad of tools to accomplish this goal. Now, as the boomers enter their retirement years, the tools, techniques and product focus will change. And, those who have identified themselves as experts in the distribution arena are ideally positioned to profit from this shift. It’s all about positioning. Many people have made a good living by servicing the current needs of the baby boomers. Few have become extremely wealthy by identifying the future needs of this group and being prepared to service those needs when they arise.

The successful producers of the future will not only be positioned to take advantage of the future needs of the baby boomers, but they will also have several, concurrent pipelines delivering qualified prospects to their business.