Cultivating group RRSP business is a lot like planting a crop: it takes a significant time commitment up front to ensure a good yield later on. But advisors willing to make the investment can reap the benefits of steady revenue and cross-selling opportunities for years to come.

“Group RRSPs are a steady stream of business with high asset retention,” says Ashley Cameron, senior vice president at Mackenzie Financial Corp. in Toronto. “It’s rare to see changes to a group RRSP.”

There is also a lot of untapped potential in the market. “We’ve found that only 2%-3% of advisors are active in group sales,” he says. “That’s a small percentage of the total advisors out there.”

That’s why advisors interested in group business will probably also find cash up for grabs when it comes to cross-selling opportunities. “For every $1 that an employee puts into an RRSP, there is typically another $5-$7 available for extra sales,” says Cameron.

Although the advantages of selling group RRSPs are obvious, time is the major obstacle to advisors pursuing this business. Says Cameron: “If you consider how long it takes to establish group business with a company with 25 employees vs the time it takes to establish 25 individual clients, it usually takes less time to set up the group.”

“Selling group RRSPs isn’t difficult; it’s just different,” adds Bill Sipes, marketing director of group savings and retirement solutions at Manulife Financial Corp. in Waterloo, Ont. “But doing anything worthwhile takes time.”

Dave Marler, an Assante Capital Management Ltd. advisor in Hamilton, Ont., can attest to that. Marler and his partner, Claudio Di Sante, decided to go after the group market 12 years ago. Today, group business makes up about 50% of their book, with half a dozen companies ranging in size from 50 to 3,000 employees. “We’re very satisfied with the way our business has developed,” says Marler. “But it’s easier to say that now than during the first few years.”

In the early days of building their group business, Marler and Di Sante looked to existing clients for leads, which Cameron says in a sound tactic: “It’s a matter of asking one simple question: ‘Do you have a group plan at work?’” And the best answer isn’t necessarily “no.”

“We typically suggest an advisor first focus on companies that already have group plans because those companies been through the process and know what they like and don’t like,” says Cameron, who notes that poor service is the chief reason why an employer will switch group plans. “Then, the advisor can take on a plan and make it better.”

Regardless of whether a company already has a group plan in place, an advisor must be confident in pitching his or her services to company executives. “You have to be able to give presentations in front of a review board and be up to speed on governance issues,” says Sipes. “There is much more of a process to group RRSP sales than to individual plans.”

Another major part of the pitch is convincing an employer without a plan that a group RRSP will increase its competitiveness. “It’s an opportunity to attract and retain talent,” Cameron says. “Losing a key employee can have a significant impact on a small business.”

Aside from the competitiveness factor, Marler and Di Sante also promote a group RRSP plan’s cost-effectiveness. “There is a definite trend toward companies moving away from defined-benefit plans to defined-contribution plans and group RRSPs,” says Marler. “A group RRSP is cost-efficient and gives employees more control.”

But getting the green light from company executives can also be a waiting game. “It may take a year or more to get them on board,” says Allen Adams, an Investors Group Inc.
advisor in Winnipeg who also targets group business. “A lot of times, the advisor may lose the business by never following up.”

And although the initial pitch can be time-consuming, the real work of selling group RRSPs comes after a company gives the go-ahead. “Just because the employer is sold doesn’t mean that the employees are,” says Sipes.

One benefit is that the group RRSP concept is an easier one for employees to grasp than a company pension plan. And getting an employer to make a matching contribution can do much to seal the deal. “A matching contribution ups the participation rate and makes the business more valuable to the advisor,” says Adams. Most employer contributions are in the range of 2%-4%, although some companies may consider contributing a higher
percentage for key employees.

@page_break@Once a company agrees to a plan, much of the advisor’s time will be spent setting things up on-site. For example, Marler and Di Sante visit a company as often as once a month in the first year of establishing a plan, hosting employee presentations and one-on-one sessions. However, Marler cautions, advisors should not expect a great deal of business at the beginning. “This is not a business that makes quick sales,” he says. “An advisor selling group RRSPs must make a long-term commitment to both the company and its employees.”

Because a group RRSP can often be an individual’s first foray into financial planning, working with small accounts is part and parcel of the business. “You’re not dealing with the select few,” says Marler.

Adams adds that some advisors can find the group RRSP business overwhelming.
“You’re dealing with people of a wide variety of ages and occupations. You might sell a company on a plan and then realize you can’t handle the volume of service that’s required. A lot of employees are starting from scratch, and they are the ones who need the most planning,” he says.

Adams, who deals with companies ranging in size from five to 250 employees, sets aside one day a month to serve his largest client’s employees. “I have an office I can use in their building; this way, I can spend time with employees without getting sidetracked,” he says.

He also makes additional visits during RRSP season. “It’s convenient. I e-mail employees in advance to set up appointments and then meet with them on-site to make sure their contributions are made,” says Adams, noting that he maintains contact with all employees by writing financial articles for the company’s bimonthly newsletter.

But while most employees sign up for group RRSPs on-site, Adams also finds home visits valuable. “Some people are more confidential and less relaxed at work, and also more apt to procrastinate,” he says. “When I meet people in their homes, their spouses — who may be the decision-maker — is there, as is all of their paperwork.”

Meeting clients at home also better lends itself to talking about additional products, but Adams cautions against rushing into cross-selling. “One of the biggest mistakes an advisor can make is expecting that everyone will become a client right away,” he says.
“You need to build a relationship first.”

Sipes agrees that a hasty attempt to cross-sell can hurt an advisor’s long-term relationship with a group client. “In order to be credible with cross-selling, advisors need to do a good job on the group RRSP first and not promote other products too quickly,” he says. “An employee will eventually approach the advisor for additional services — I’ve seen it happen time and time again.”

That’s the approach Marler and Di Sante have taken. “We don’t use our group RRSP sales base for cross-selling, but clients do come our way once they’re comfortable with us,” says Marler.

Adams pursues cross-selling opportunities through seminars and mailings, but only when the time is right. “When you’re working with individual clients, you always feel as though you need to be prospecting,” he says. “With group business, you always have
more than enough clients to talk to.” IE