Thinking about opening a firm

[Guest In_Over_My_Head]

I have an excellent technical background and am thinking about opening my own TPA firm (non-producing). Hopefully people don't mind sharing, but I have two main questions. How do you drum up the most amount of business? Is it mostly through financial advisors? Are there tactics that work over others? Additionally, how do you decide what to actually charge people?

Finally do most of you guys use your own recordkeeping software, or do you use the products offered by some of the larger recordkeepers? Which recordkeepers do you recommend?

Thanks for any help people can give!

[leevena]

Your question about how to find business is the most important thing about opening a business. Finding clients can be done in a variety of ways, but cannot be done in this forum. You should get some thoughts and ideas from people, but I suggest doing an indepth analysis of your market. Often times a marketing and sales plan becomes very apparant.

Pricing can become a moving target for you. As I mentioned above, your market analysis should give you a good overview of what the competition charges. This should be a good start for your pricing development. Often times a new company will discount their costs in an effort to get clients, which help to bring credibility to you.

Good luck.

[Guest In_Over_My_Head]

Just to be clear to everyone, I was not looking to find clients in this forum. I was wondering how other people went about find clients, which to me is a major distinction.

[leevena]

Just to be clear to everyone, I was not looking to find clients in this forum. I was wondering how other people went about find clients, which to me is a major distinction.

I am sorry. My posting was not clear and I apologize. I did not intend to my response to insinuate that you were looking for clients at this site. Rather, I was stating that a forum like this is good for short and quick answers, not a good vehicle for developing a plan. Sorry for any confusion I may have caused.

[masteff]

Is it mostly through financial advisors?

A quick (but certainly incomplete) list for networking comes to mind: insurance brokers (especially those dealing in group health and life), law firms (especially w/ ERISA specialty), and accountants. Also, does your area have a local benefits group (our's meets for monthly luncheon and presentation) (maybe call the benefit departments in a few of larger employers in area and ask if they belong to one)? Maybe think about Rotary and other groups that are frequented by local businesspersons.

[JanetM]

BBB, Chamber of Commerce, local business organizations, and local trade groups are also great places to find small business owners that are potential clients.

[Steelerfan]

As to financial advisors, my experience is that you would be wasting you time with them when you are starting up. A meeting with a FA might get you a free lunch, but they will be seeking to get business from you, and will abandon the relationship quickly if they don't get something out of you quickly.

I'm not knocking on financial advisors, oh wait, yes I am!

[John Feldt ERPA CPC QPA]

Financial Advisors and CPAs have worked okay for us. One thing we've done is given state-approved seminars for continuing education for financial advisors and CPAs. When we show them the illustrations of real-life cases of how a plan looked before we got involved, to how it looked after we got involved, after their initial shock, they start wondering if we could review some of their clients' plans. They bring clients to us, and we never shop their plan to another advisor. Nor do we disclose the names of any of our other clients to them. With enough contacts like this, you'll easily grow your business. We disclose all fees to the client as well, so no surprises pop up later when they wonder how that advisor is getting paid the most from the plan. This also helps to protect the advisor, by usually keeping their fees competitive. We have come across a few bad advisors and/or CPAs that we simply had to stop doing business with though.

Our goal is to work with the CPA's (or advisor's) client to see if the design can be improved. For new plans, we work with the advisor or CPA to find out what the decision maker's true goals are so the correct design can be built. Many times they think "I want an ABC plan", not knowing that an "XYZ" plan would actually help them reach their goal more effectively. Many TPAs build cookie cutter plans based on the "I want an ABC plan" statement. We take over those kinds of plans later on. The best way to start with that client is to spend the time asking the deeper questions. Sometimes they want the largest possible deduction you can come up with. Of course, then you tell them $500,000 and they are surprised that's even possible when they were really only looking for about $100,000 - well that's a totally different plan design then. You get the picture.

After the CPA's (or advisor's) initial success with their first client using your services, they feel comfortable bringing more. Keep in mind, our average client size is only about 30 participants. These advisors and CPAs might only bring you 1 client in the first year, then maybe 2 to 4 per year thereafter, then less after a few years when their client list is tapped out. So, under our model, we have a lot of CPAs and advisors as contacts, which brings in about 100 plans per year. Our sales folks rarely do a cold call anymore.

We should not discuss fees in this forum.

You may wish to attend a Technical Answer Group conference for business owners sometime.