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Why Write a Retirement Services Business Plan? Do you want to grow your business? Do you want to win the right clients? Do you want to take your business to the next level? Then you need a business plan!

As part of our on-going effort to provide you with tools and resources to grow your retirement business, MassMutual Retirement Services is proud to present this Business Plan Development Guide. You can use this guide to help you customize a plan to set and achieve your goals. A business plan is useful at any stage of your career. It is a strategic tool to ensure your actions are aligned with your vision and goals. Studies have shown having written objectives and plans significantly increases your likelihood of success. This tool sharpens your business skills and focuses your energy and strategy.

For example, if your goal is to provide a total benefits package, the business plan will help you define your exact strengths (e.g. Defined Contribution and Relationship Management) and illustrate areas where you might benefit from aligning with others (e.g. Defined Benefit and Back-End Support). In essence, this business plan is an action plan which will help you make your goals a reality.

Considerations in Writing a Business Plan This Business Plan Development Guide will encourage you to think deeply about your business and your strategy. Spend some time answering each question. By clearly defining your value proposition and having it be second nature to you, it will be much easier to get an appointment when you approach a potential new client.

Focus on Your Client Put yourself in your client’s shoes and think about what is important to them. Look beyond the product feature story. Be a consultant by first discovering the needs and objectives of your prospective client, prepare a gap analysis and then provide custom-developed solutions for your client. Avoid discussions of specific products or providers until you are have identified the client’s goals.

Build Your Team As you develop your team and select your key associates, make sure everyone’s skills and offerings complement one another before approaching the client. Be clear in the roles and responsibilities of the provider, you (the advisor), and the plan sponsor (client). In the RFP, for example, add your strengths and experience to the provider’s response so you create an integrated story of how each party adds value and directly addresses the specific needs of the plan sponsor.

In today’s environment of increased competition and higher fee transparency, it is all the more critical to be able to clearly state your value added services to the plan sponsor. You must be able to differentiate your services from those of the rest of your team, such as the provider.

The following material is an example of what your business plan could look like. It asks the questions you should be considering as you develop your own business plan. Business plans take many different forms, for many different purposes. Combine the following example with your specific experiences and needs to create the tool you need to grow your business.

Power Up Your Business to Grow MassMutual Retirement Services Presents … A Business Plan Development Guide

FOR PRODUCER USE ONLY 1

ABC Financial Services

Business Plan

Adam Advisor, CFP, QPA Retirement Program Consultant

ABC Financial Services One Consultation Way Anywhere, MA 00000

Phone: (555) 555-5555 Fax: (555) 555-5556

Email: [email protected]

FOR PRODUCER USE ONLY

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EXECUTIVE SUMMARY ..................................................................................................................................... 3 VISION ................................................................................................................................................................ 4

Goals .............................................................................................................................................................................. 4 VALUE PROPOSITION ....................................................................................................................................... 6 MARKET RESEARCH AND ANALYSIS .............................................................................................................. 7

Industry Analysis.............................................................................................................................................................. 7 Target Market .................................................................................................................................................................. 8 Competitive Analysis ........................................................................................................................................................ 8 Growth Strategy ............................................................................................................................................................... 8

SERVICES DESCRIPTION ................................................................................................................................. 9 OPERATIONS ................................................................................................................................................... 11

Team and Resources ..................................................................................................................................................... 11 Prospecting and Sales Process ....................................................................................................................................... 12 On-Going Servicing ........................................................................................................................................................ 14 Training and Development .............................................................................................................................................. 15 Risk Mitigation ............................................................................................................................................................... 15 Periodic Evaluation......................................................................................................................................................... 15

FINANCES......................................................................................................................................................... 15 CONCLUSION ................................................................................................................................................... 16


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EXECUTIVE SUMMARY

The Executive Summary should be written last – after you have worked through and developed the rest of your business plan. It will be a 1-3 page summary of what you do, what your value proposition is, your target market, your goals and how you plan on achieving those goals. This section needs to be succinct so the reader can easily understand your business. It may help to include a financial chart of your projected 5, 7 or 10 year revenue, margins and profits.

Develop an “elevator pitch” based on your executive summary of why a plan sponsor should work with you. If you happen to be in an elevator with a potential client and she turns to you and asks, “What line of business are you in?” what would you say in the 30 seconds before she reaches her floor that would explain what you do in an intriguing manner so she is compelled to ask for a follow-up meeting? Practice, practice, practice saying your elevator pitch out loud enough times that it just rolls off the tip of your tongue.

This is the section which you can review on a quarterly basis. A business plan is only as good as the actions taken, so revisit the business plan (at least the Executive Summary) regularly. Comparing your plan with your actions and results will help you stay on track. Make sure this section is clear and concise – this will make it much easier to use in the future.

By following this development guide, you will go through an in-depth analysis to create your business plan. In the final stages of the process, you should select the most important points from your plan to include in your Executive Summary. Typically, the following questions would be answered in this section.

What do I do? What is my value proposition? What is my competitive edge? Why should a plan sponsor select me above any other retirement services

financial advisor? Who are my competitors? What are my competitors’ strengths and weaknesses? Who is my target market and what is the market size? What is my projected business plan? (e.g. annual sales income and growth potential) What are my action steps

to reach my goals?


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VISION

Briefly describe your current business, but most importantly, focus on what you envision your business to be in the future. Discuss the types and number of clients you aspire to have and briefly describe how you will get there from your current business model. This section is a high level vision statement. The details will be flushed out in future sections.

Why am I in business? What does my current business look like? What will my business look like in 1-5-10 years? Who are my current clients and how does that compare to my ideal clients? How will I win and retain my ideal clients? What are my milestones?

Goals Set SMART goals (Specific, Measurable, Action-Oriented, Realistic, Time-Specific). Keep a log in a journal of your actions to achieve these goals and your progress on a regular (weekly, monthly, quarterly) basis. Form an agreement with your business associates, spouse, friends or administrative staff to keep you accountable on your progress.

S Specific: Be clear and concise about your goal. It should be easily understood. Describe: Who, What, When, Where, Why. Rather than setting a generic goal of “Increase Sales”, set a specific goal of “I will increase sales by 6%, and increase assets by $100 million in 12 months”

M Measurable: Make sure you can monitor your progress and evaluate whether or not you have achieved your goal.

A Action-Oriented: What actions do you need to be taking to obtain these goals? These goals should not “just happen” to you. You need to make them happen.

R Realistic: This does not imply “easy”, but given your resources, time and knowledge, can you achieve the goal, given that you will also want to “stretch” yourself as well?

T Time-Specific: Make sure you give a time-frame to reach your goal.


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Example: My Goals – January 1, This Year I will increase sales by 6% in 12 months. I will increase my new Assets Under Management by $108 million in one year (by January 1, next year). I will increase my average plan size from $5 M to $20 M in three years (by January 1, Year 3). I will gain five new contacts and three sales appointments per week. I will obtain CEBS (Certified Employee Benefit Specialist) Designation by July 31 of next year. I will attend a professional conference every year.

CURRENT (1/1/ YEAR 0)

1 YEAR - (1/1/ YEAR 1)

2 YEAR – (1/1/ YEAR 2)

3 YEAR – (1/1/ YEAR 3)

Total AUM: $100 M $208 M $335 M $487 M New Contributions Previous Year AUM Other AUM1 (growth, redemptions, etc.)

N/A N/A

$100 M $100 M

$8 M

$110 M $208 M $17 M

$125 M $335 M $27 M

Average Plan Size of Client:

$ 5 M $10 M $15 M $20 M

Annual Sales Revenue: TBD TBD TBD TBD

Profit Margin: TBD TBD TBD TBD

Proposals 3 6 8 12

New Sales (Closed Sales)

1 2 3 5

Proposals/New Sales Ratio 33% 33% 38% 42%

1 Assumes net 8% growth of previous year’s Assets Under Management. This growth estimate does not include New Contributions.


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VALUE PROPOSITION

Show your value to your clients. Document your unique qualifications, expertise, and core competencies. Provide proof of how you have helped other clients. Build a portfolio of sample deliverables that you have used to assist clients better administer their plans. Illustrate results that improved key statistics, such as contribution rates or enrollment percentages.

Focus on the benefits to the plan sponsor, not features of the product. Concentrate on plan sponsors’ issues and how you meet their needs.

What is my competitive edge? What makes me stand out above my peers?

Why should a plan sponsor choose me?

What can I offer to my clients that they cannot do on their own?

What value does a plan sponsor receive for my fee?

What are my unique qualifications, expertise, core competencies?

What are my key competitive weaknesses and how can I address them?

How can I add value to my current and future clients?

For a comprehensive example of an Advisor Value Proposition Statement, see MassMutual’s Advisor Business Tools: Illustrative Value Proposition Statement at www.massmutual.com/powertogrow.


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MARKET RESEARCH AND ANALYSIS

In addition to the “top-down” approach (how big is the market, what percentage will I capture), it may be more effective to approach it from “bottom-up”. Who are my ideal clients and why? How will I win and retain my clients? What is the compelling need that my services fulfill? What is my unique approach that differentiates me from my competition?

Industry Analysis Target Market Competitive Analysis Growth Strategy

Industry Analysis What is my defined market? How big is my market? How is the market changing or expected to change in the next 1-3-5-10 years?

Example: Trends in the Retirement Services Marketplace

Providers Challenging economic times, therefore more providers are consolidating Plan Sponsors want providers with good size, scale, stability for service and long-term feasibility Fee transparency

Plan Design Trends DC/DB/NQ integration Simplify savings: auto enrollment/savings; target maturity investment options IRAs in 401(k)s

Investment Trends Menu simplicity Investment flexibility Co-fiduciary roles Investment oversight

Communications Participant Service Multi-lingual Web services vs. print Encourage specific behavior not just education

Plan Sponsor Needs Compliance assistance Fiduciary responsibility Risk management: investment, operational, communication, compliance, administration Recognition by employees for providing participant benefits Increased ease of doing business


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Target Market Who are my target clients? What are their common characteristics, needs? (e.g. industry, geographic

location, plan size, etc.) How do my clients make their buying decisions? What are their most important issues? Why is this my target market? What special relationships, background or history do I have or could I

develop to flourish in this market?

What is my strategy for reaching this target market? What is my marketing strategy? (Advertising, Mailings, Articles, Conferences)

Example My target market is mid-size ($10-50 million plan size, 20-300 participants) high-tech companies in the Mid-West area. My past career as a financial analyst of high tech companies and my personal ties in the Chicago area give me unique qualities to serve this market. My clients are fast-paced who make decisions quickly with brief information. Therefore, my discussions and presentations will be concise. I plan to attend a minimum of 2 conferences a year for high tech HR or CFO executives or benefits. In addition, I will network with the Mid-West Technology Association and be a premier member.

Competitive Analysis Who are my primary competitors? What are their key differentiators? What can I learn from the competition? How can I differentiate from them? What are the competitive products/services in the market place? What opportunities (gaps) exist?

Growth Strategy How will I grow my business? What are my growth targets? How will I position myself to reach these goals?


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SERVICES DESCRIPTION

Describe your current services, focusing on your key differentiators and core competencies.

What services do I provide? How will I position my services? How do my services compare to the competition? What are future products/services that I may want to offer and why? How will I enter this new market?

Example: Areas of Expertise Defined Contribution

Assumption of Fiduciary Responsibility Monitoring/Documentation of Investment Policy Statement Participant Relationship Management and Planning

Defined Benefit

Benefits of ‘Bundling’ Asset/Liability Management Current Benefits Provided vs. Plan Costs Investment Oversight

Total Retirement Services

Economies of Scale by Integrating Plans Creating a Total Retirement Program for Participants Single Access Point for Plan Sponsor

Niche Markets

Corporate 401(k), Roth 401(k), Defined Benefit and Combined Defined Benefit/Defined Contribution, Profit

Sharing, Safe Harbor, Taft-Hartley, Not-for-Profit 403(b), 403(b)(7), ERISA 403(b), 457(b) / Top Hat, Executive Benefits Non-Qualified Plans, COLI, Long Term Care, 409(a) Deferred Compensation, Private Placement Life

Insurance and Annuity, Group Universal Life


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Having a well-constructed value proposition for each service offering is necessary to differentiate yourself from other advisors. The example below is a high-level summary of a Value Proposition Statement.

For a comprehensive example of an Advisor Value Proposition Statement, see MassMutual’s Advisor Business Tools: Illustrative Value Proposition Statement at www.massmutual.com/powertogrow.

Example: Value Proposition Summary

Investment Portfolio Strategist Investment Program Design Investment Policy Statement Monthly Performance Monitoring Quarterly Investment Review

Fiduciary Review Consultant

Policy and Procedure Implementation Bond and Insurance 404(c) Compliance Plan Audit

Plan Education Specialist

Highly Interactive Enrollment & Participant Education Meetings One-on-One Consulting Quarterly Plan Update Newsletter E-mail Availability

Provider Due Diligence Consultant

Plan Sponsor Interview Participant Survey Benchmarking Analysis Provider Selection Expertise


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OPERATIONS

This section will detail how your business will run. Key team players and growth plans should be discussed. Your prospecting, sales and on-going servicing process should be detailed. In addition, you may want to cover office expansion or growth into different geographical areas.

Team & Resources including Key Personnel Growth Plan Prospecting and Sales Processes On-Going Services Training and Development Risk Mitigation Periodic Evaluation

Team and Resources Who is my team? (e.g. Corporate Resources, Immediate Staff, Providers, Other Advisors, Educational Resources Professional Organizations)

Who is on my team? Why are they on my team? What are their qualifications? What resources do I have available?

Example: Team & Resources

Adam Advisor is a Certified Financial Planner (1990) and a Qualified Plan Administrator (1992) who has been focused on the needs of corporate retirement plans for over 15 years. He received a Bachelor of Science (BS) and a Masters of Business Administration (MBA) from the University of Anywhere. He is an active member of American Society of Pension Professionals and Actuaries (ASPPA). He manages over 20 institutional retirement clients and $250 million in assets. Supporting Staff … ABC Financial Services is a diversified financial services organization focused on prudent investing principles. Founded in 1962, the firm currently has over $10 billion in assets under management, of which $7 billion is in retirement services. ABC was voted one of America’s top 100 places to work for women by Leading Executive Magazine. The 100+ financial professionals of ABC are dedicated to delivering solutions that are designed to meet each client’s unique long-term goals and objectives.

Provider 1 (Provider XYZ): Financial Strength: AAA Rating, $395 billion Assets Under Management (AUM) Retirement Services Experience: 60 years, $33 billion Retirement AUM, Over 1 million participants,

5000+ clients Key Differentiators: Flexible Investment Program, Provider Investment Fiduciary Opportunity,

Behavioral Approach to Participant Retirement Planning, Technology Innovator, Web Resources Team: (List Key Contacts and Contact Information) Managing Directors, Transition Team, Relationship

Managers, Communication Specialist, ERISA Advisory Services, Client Advisory Committee, Account Managers, Client Service Representatives


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Prospecting and Sales Process Know your client. Recognize that the head of Human Resources or Finance may have different hot buttons. Tailor your approach according to the needs of the decision maker. You may also decide to position yourself as an objective advisor offering a solution rather than a provider representative advocating a specific product.

Potential clients often want to know:

What competitive advantages do you offer as a retirement plan advisor? How do you make our investment reviews pertinent to us? Please provide the qualifications and background of you, our primary contact, and anyone else on your team

with whom we would have regular contact. How early in the sales process would we meet the other team members that would handle our account?

Please describe the service experience of a current client whose size and characteristics are comparable to our plan.

What is the process for starting a new plan or rolling-over an existing plan? Please provide samples of your standard reports. What are your customizable report capabilities? What web, on-demand access or other technology capabilities do you have? What benefits do they provide to

your clients? What kind of educational information do you provide to your clients?

Get in the door with engaging questions such as: If you could change one factor about your retirement plan, what would it be? How well is your plan meeting your expectations? What is the current plan design of your retirement program? How can you improve the services and costs efficiency of your plan? Are you aware of the proposed IRS regulations that could effect your plan? How does your plan compare to benchmarks (such as investment performance, mortality and expense fees

and enrollment participation)? What are you doing to ensure your plan is ERISA Section 404(c) compliant? Who is your current service provider? What fees are you paying now (e.g., investment and plan expense fees?) What types, if any, of employer contributions do you have? (e.g. Match, Non-Elective Contributions)? Who manages your plan documents and SPDs? Are you charged for plan amendments?


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More Engaging Questions Examples Employee Education How well is your plan meeting your expectations of employee understanding and appreciation? How many employees are participating? How do you evaluate employee satisfaction? (e.g. surveys, enrollment and participation rates, other

feedback) How do your employees feel about their retirement plan offerings? What do they like and what are the

areas of potential improvement? How often do you hold educational meetings for your employees? Who conducts the meetings? Are they

face-to-face meetings and/or one-on-one consultations? What kind of information is presented at the meetings? (e.g. Reasons to Save for Retirement, Investment

Education, Importance of Diversification, Impact of Life Changes on Retirement Planning) What information should be presented to your employees that is not currently being provided?

What other ways can participants access plan information? (e.g. Web Site, Teletouch, Individual Counseling)

Service Platforms Who provides administrative and recordkeeping services for your plan(s)? Can multiple plan types (e.g. DB, 401(a), 403(b), 457(b)) be integrated into one statement? Is the

information presented in an understandable and useable format to you? Do you use automated, electronic submission of contributions? Can you perform data transfers of

demographic and compensation data electronically? Fiduciary Responsibility What are you doing to manage your increasing fiduciary liability? Who prepares the plan’s Form 5500 and associated schedules for ERISA required plans? How do you perform your annual compliance and nondiscrimination testing? Who monitors participants

exceeding the IRC 402(g) limit? Investments What investment options do you offer? Do you offer group annuities or a registered mutual fund based platform? Who is the provider? What are

your plan administration and investment fees? What is the back end load? What kind of income management solutions do you offer? Do you have individual annuity options? Do you offer a fixed investment option? What is the rate? Is there a maturity date on the contract? What is

the back end load or market value adjustment?


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On-Going Servicing How will I provide on-going value-added services to my clients so that they rave about my services and do not

hesitate to refer me to other potential clients? How will I keep myself in the forefront of my client’s mind so that if a competitor came to prospect to her, she

would immediately say she is so happy with her current advisor she wouldn’t dream about changing advisors?

Example Pre-Scheduled Quarterly Investment and Fiduciary Reviews with Client Plan Oversight Committee Reporting of investment performance and watch list status Overview of past quarter and upcoming year’s communication and education campaign Discussion of client goal’s and targets (e.g. participation rate, % deferral)

Metric Scorecard Performance; Progress on meeting this year’s goals Industry trend updates

New services Legislation updates & watch Items Benchmark analysis of products, services, fees

Fiduciary Guidance Review Investment Policy Statement Highlight areas of potential concern to mitigate risk

Communication Campaign Quarterly e-mailed newsletters to participants Semi-Annual e-mailed newsletters to Plan Sponsors Annual participant survey

Education Plan Seminars: (Retirement Investment Basics, Roth IRA, EGTRRA, Changing Jobs or Retiring, My Retirement

Planning Tools, 401(k) Basics, 403(b) Basics, Loans) Interactive enrollment & re-enrollment meetings One-on-one consulting available

Internet Communications Plan Sponsor: Interactive Web Reporting and Servicing Site Participants: Interactive Web Servicing Site


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Training and Development How do I build expertise and credibility? (e.g. Conferences, Certifications, Association Membership)

Risk Mitigation What are my areas of biggest risk? How can I mitigate those risks?

Example: Risk Mitigation

I am a practice leader in the defined contribution field. However, in order to provide a complete retirement solution to specific clients, I would like to establish relationships with defined benefit specialists. Furthermore, I would like to enhance my executive benefits offerings by associating with a specialist in Executive Life Carve-Out and Private Placement Insurance.

Periodic Evaluation In order for the business plan to be used most effectively, it is critical that the plan be tested and periodically reviewed.

Am I on track to reach my financial and business goals? If so, how can I leverage what I know to be even better? If not, what do I need to do to get on track?

FINANCES Financial projections are estimates of what your future financial positions will be. You need to really understand the financial implications of your strategy. The projections do not need to be accurate to the penny, but you should understand the different levers in your business, so that if certain factors change, you know how it will effect your financial performance.

What does my current Profit/Loss Statement and projected Profit/Loss Statement look like? What are my current operating costs? How much do I need to make to survive/grow/be happy? What are my projected operating costs? What are my Cash Flow Pro-Forma Projections? What are my Balance Sheet Projections? What are my important financial ratios and analyses? What is my break even analysis?


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CONCLUSION Congratulations! Once you have completed the business plan development process, you will have analyzed the most critical parts of your retirement services business. Make sure you go over your entire business plan and select the most essential elements to summarize in your Executive Summary. That will be the section you can refer to quickly throughout your career to make sure you are on track. Remember that a business plan is AN ACTION PLAN. Follow the path you have worked hard to build in your business plan. Review and revise it as your business grows.

We hope this Business Plan Development Guide will benefit you as you advance your business. To learn more about selling in the retirement plan market or MassMutual’s products and services, we invite you to contact the MassMutual managing director in your area, or call 1-888-769-0609 today. We value your feedback. Please contact us at [email protected] with any comments on our Advisor Business Tools.


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© 2006 Massachusetts Mutual Life Insurance Company, Springfield, MA. All rights reserved. MassMutual Financial Group is a marketing designation (or fleet name) for Massachusetts Mutual RS3099 806 Life Insurance Company (MassMutual) and its affiliates. C:08596-00

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