Building a retirement plan business, with Greg Mendoza 

Will McKenna: Hello, and welcome to the PracticeLab podcast, where we talk to top advisors about what makes them successful, so that you can apply those lessons in your own business. I'm your host, Will McKenna, and our guest today is Greg Mendoza, who leads a team of seven at his UBS office in Hartford, Connecticut. Greg specializes in 401(k) retirement plan business, and his practice also has a successful wealth management department. In total, they serve about 80 401(k) plans in 250 households, representing assets of around $5 billion.

Now, if you're interested in doing more retirement plan business, then this episode is for you. That's because Greg shares some of his secrets of success, and the exact steps you can take to target plans in your market and potentially grow your business.

So, without further ado, let's jump into this episode of the PracticeLab podcast. Greg Mendoza, welcome to the PracticeLab podcast.

Greg Mendoza: Hi, Will. Thanks. Thanks for having me.

Will McKenna: Great to have you, and a lot for us to get into today, really looking forward to this. But I thought we might just start by asking you to paint a picture of your practice as it stands today.

Greg Mendoza: Sure, our practice can be described as what we would say a dual practice. The first group of people we work with is private clients or wealth management, other people define it in one of those two ways. And then our major specialty is institutional, which is 401(k)s with a growing factor of endowments and foundations. There's seven members on our team: three financial advisors, one functions in the private client business only, me and another function in both the K plans and private clients. And we serve as relationship managers and new business developers. In addition to that, everyone else on our team supports us and/or clients in some way, shape or form. We have a CFA, who is our portfolio strategist. He's a relationship manager on some very important relationships, too, and does our models and our trading, all our fund due diligence, ETF due diligence. We have also a CFP on staff. He does trading functions in all our retirement plan communications with participants, so any incoming calls come to him. We have a head administrator. Patty is our CSA; she runs all operations for us. And our newest employee started with us about two years ago, fresh out of college. And he does all our comprehensive financial planning, builds our financial plans, interacts with all the record-keepers, and has a very bright future within our team in this industry. [We're] very much a process-oriented team. We're self-motivated, autonomous, and we all feel empowered to do our jobs. I would say the majority of our revenue is from private client business, but by far the majority of our assets under management are K plans. We function in the K plan space from a few million dollars a plan, up to over almost 2 billion. So, I think collectively, we're just over 5 billion in assets at this stage.

Will McKenna: Got it. Thank you. That's great. And as you mentioned, one of your areas of specialization is in the 401(k) business. To help our audience understand, how did you even get started in that business?

Greg Mendoza: Sure, great question. When I first started, it was in 2000, with Smith Barney. And at the time, firms were in a big growth phase. I was one of 115 in my training class. There were five new FAs in my office. And there were probably six to eight training classes per year. Nowadays, there might be 50 added new FAs per firm. But at that point in time, I didn't really want to cold call homeowners, what we called “resis,” residences. One, people weren't really home from 9 to 5, and I myself personally hated getting calls at home. And everyone else in my training class was focusing on resis. So, to me, I said, “How can I be different? How can I make for the most efficient use of my time?” To me, I decided to focus on business owners. Business owners were always at work both early and late. They always took the phone calls that came to them (who knows if it was a customer calling them?), and they would always listen to their voicemails, which I occasionally left and people would call me back, believe it or not. And it turns out that business owners were everything I had hoped they would be. They have all the needs in the world, really no time to help themselves. They are used to delegating portions of their business to other people who are competent and have that skill set. They are decision-makers, and relatively quick decision-makers at that. And then long term, they could not only be 401(k) clients, but they could also be private clients. So, to me that was utopia. That's how I focused initially on retirement plans, but I had to start somewhere. You just don't get into this business and know retirement plans.

Will McKenna: Yeah, I was gonna say, that's an interesting story. I like that. But it's a fairly technical business, as I understand it. You have to have a good base of knowledge around 401(k)s. How did you get up that learning curve? How did you literally get your first few cases?

Greg Mendoza: It starts with trying to understand the vernacular or jargon that's unique to the 401(k) space, and all of us as financial advisors probably are participants in our company's 401(k). So, the primary ingredients we have at our disposal. We know what a 401(k) consists of. There's a record-keeper, there's an administrator, there's investment options, and sometimes there's an advisor. But then what you need to learn about, which takes time, is what makes different record-keepers or administrators have strengths or weaknesses versus others. And then how do you move or improve a plan with the current record-keeper/administrator, and potentially convert to someone else? So, I actually had, based on ZIP codes, the names, addresses and phone numbers of businesses that were in  10 or 12 ZIP codes in the greater Hartford area. And I had a little notation system on each one of them, every time I call them, I put a hash mark. If I talk to someone, I would date it. And I would start my initial phone call with, “Listen, I'm a retirement planning consultant. I work on 401(k) plans with business owners and participants. I imagine you have one, or perhaps would be interested in learning why one might be of benefit?” “May I conduct an analysis for you? Let me send you a business card and description of my services. Does that sound fair and make sense?” Now, to me, that's logical. Most people would say yes. Nowadays, with LinkedIn, networks, existing clients who either own businesses or have participants, you could actually, if you're doing a good job on the private client side, you should probably be looking at their 401(k), too. And that document in itself can tell you some potential flaws or weaknesses in the plan. And then there's also publicly available 5500s that you can do a little diligence on.

Will McKenna: You don't need to use the name necessarily of the business. But are there any cases that you and the team have won and help us understand what that looks like from end to end.

Greg Mendoza: Opportunities arise in different ways. Sometimes a private client will speak to the plan sponsor for us unsolicited, or we’ll review their personal 401(k) statements, and then seed, plant the seed to them to maybe talk to their employer, “Hey, our advisor said that these fees are high, or we don't have a robust investment menu. Would you be willing to talk to this person?” Often an FA partner brings us into an opportunity. We're very fortunate to be known for the quality of our work in this space, and FA partners come to us with opportunities. We respond to RFPs. And often centers of influence, which we cultivate over time, make us aware of opportunities that we can then compete for. But what makes us different and unique, I think, is we apply white gloves throughout the entire process. What we say to human resources is, “Listen, we imagine you don't have someone in your corporation, and it may be you, whose sole focus is to just work on the 401(k) plan.” In this day and age, sometimes it's the art of saying without saying. HR people, unfortunately, feel overwhelmed. There's a lot of initiatives. The 401(k) doesn't always take the front burner, and they need help. So, we'll tell them we're going to be a virtual extension of your HR organization. We're going to help you; consider us an advocate of yours, and we can liaison between all your plan’s parties. So, we'll be involved in every single welcome call that American Funds or a different record-keeper has at the time of implementation and conversion. We will draft memos on behalf of the HR department that contain important dates, actions that need to or not need to be taken, so they can distribute to their participants. And if a plan conversion is happening, we'll set up a webinar or a series of conference calls two weeks out, so that even though they got that memo a month ago, it's fresh on their mind. And basically, what HR feels about that is, they've got an advocate. There's less people coming to them with questions because we are serving a large capacity and trying to assist them. And then, once the client is on-boarded, we provide quarterly reviews, investment monitoring, adherence to investment policy statements. We provide fiduciary education, participant education and, you know, provide them a year in review. You know, never forego the opportunity to tell them all the work that's being done behind the scenes at the end in each of every year.

Will McKenna: You know, most advisors don't specialize in retirement plan business. What advice would you give an advisor like that, who's interested in doing more retirement plan business? What are some of the steps they can be taking and get more involved in this business?

Greg Mendoza: Sure, so, I would say the progress, or dare I say success, that we made over the years, we really have to give credit to a lot of our partners. American Funds, call their retirement plan wholesalers, retirement plan counselors. They are a tremendous resource available to anyone who is interested in learning this business a bit more. Oftentimes if you approach them, and express to them that you want to do more and more of this business, they're going to be very excited and probably willing to give you an understanding as to what it takes to get into that arena a little more. They'll help you build up an understanding of the industry, the terms you need to use, how to look at your pre-existing plans, potentially improve them, some starter conversations and marketing ideas on how to get new opportunities. So, I think that's probably one of the best places to start, because they're sitting waiting for their phone call from someone like you to say, “Can you help me grow my retirement plan business?” Will, I would say, too, there's a misconception that someone needs to go into retirement plans and immediately be an expert. I would imagine whether you have only a handful of plans, or you have none, that if you surround yourself with the right providers, and the right  RPCs, if you would, again, retirement plan wholesalers, all you have to do is present the opportunity. I'm sure there are instances where they do the majority of the talking, the majority of the fact-finding. They can tell you the questions that need to be asked. So, talk to RPCs at Capital Group or retirement plan wholesalers at other record-keepers, and ask them for their best ideas. I have some ideas, but RPCs and retirement plan wholesalers, they're talking to hundreds of other people like myself in their territories, and they've got great experience on how opportunities arise and how opportunities are closed.

Will McKenna: You don't have to be an expert to get into the retirement plan business. That's such a great point that Greg makes, and his experience is that you can make big gains by working with the right providers who can show you the ropes and help you acquire new 401(k) business. Now, let's talk about Greg's wealth management business, where one of the key themes is: Practice efficiency and productivity. In fact, Greg and his team went through a practice management program a few years ago; it's called Supernova. And it helped them both segment their client base and refine their 12-4-2 service model. And that stands for 12 monthly calls,  four quarterly reviews (two of which are in person). So, this next section, you'll also hear Greg talk about their highly effective investment management process, where they use model portfolios to ensure consistency, scale and efficiency.

Will McKenna: Why don't we shift gears and talk about the wealth side of your business? Can you just describe that in a little more detail? What would you say characterizes or differentiates your team's approach to the wealth side of your business?

Greg Mendoza: I'm not sure we're doing anything secretive, special, unique. What, we're just doing the things that should be done, and we do them consistently, and I'd like to think we do them well. So, all clients or prospects go through a very robust financial planning process and portfolio assessment. We ask a lot of information; we tell people what our process is from the beginning. And nowhere in the beginning does it talk about product or sales. We say, just like your doctor or your attorney, we need to understand and obtain information from you so we can figure out best how to help. On the private client side as well, we don't recreate the product. We have a very dedicated investment process. Most of it is what we call PMP, where we serve as advisory, if you would, so ‘fee for service.’ We are very much asset allocation believers. We have a handful of vehicles in which we can execute in per asset class. We don't have 15 large-cap value funds, 15 large-cap growth funds. We use mutual funds, ETFs, and a handful of stock sleeves. But we try and keep it relatively simple. And I think it's important to do that, because you can know your funds and your vehicles very intimately. You don't have a lot of dispersion amongst your book of business. And if you want to make a change, you can do so without having to wait for a client to call you a week later. So, it's efficient. We also look at both sides of our clients' balance sheets. I think it's very important to understand their liabilities as well as you do their assets. And then I think one area of our practice that we think makes us unique, although other people who are listening to this call might have heard of it before. Many years ago, we went through a process called Supernova. At the end of the day, it is focusing on your best clients and having a detailed service model and adhering to it. And we've boiled it down to something we refer to as a 12-4-2 model. If you're an existing client of ours, you're going to get 12 monthly contacts, four quarterly reviews, two of which are probably in person. And if you call us or email us, you're going to get a response by the end of the day, or at worst case 24 hours. So, we find there's a common element in our most successful relationships, and I think not just professionally but probably personally. Our best relationships are managed because expectations are known upfront and then can be continued to be met on an ongoing basis. People go into a relationship eyes wide open, and then there's no surprises through it or on the back end of it as it matures. So, I think that's a description of our wealth management practice. Again, I don't think we're doing anything different. But we're doing all of it.

Will McKenna: You referenced this a little bit earlier. But the idea of the wealth business leading to retirement plan business, can you give us some visibility, some insight into that and how that works for you.

Greg Mendoza: We have private clients. They're either business owners or, more often than not, they're employees of a business that have a retirement plan. And as I referenced earlier, if we're doing a sufficient job, we should not only be looking at the assets that we manage for them in our firm or our coffers, but we should also be looking at all their outside assets, too, which includes their 401(k) plan. And you'd be surprised at what information you can glean off a 401(k) statement, and 5500 filings, and put that in front of, you know, an American Funds RPC, and have them, if you can't do it on your own, identify potential deficiencies in that plan that can lead to a discussion. So, whether you have the chicken (which is the client) on the private client side, or you have the egg (which is the 401(k) plan), there's a lot of opportunity to go back and forth and develop additional business opportunities.

Will McKenna: You had talked about, don't confuse activity with productivity essentially. So, tell us what you meant. Give us more insight into that, I'd love to hear what productivity means to you. Give us a deeper dive there.

Greg Mendoza: Yeah. So, I will say, there's a couple ways to answer that question. I can remember in my early days, you have no book of business in the beginning. So, all you can do is prospect and try to acquire new clients. And there's multiple ways in which to do that. You can network; you can stuff envelopes and mail, which is a horrible idea. Or you can get on the phone and cold call, which wasn't fun. This is back in the day; there's all different ways to do it now. And I remember sort of coining the term ‘avoidance behavior.’ I was no different or better than any of the other people in my training class or in  my office, but a lot of people would say, “You know what? I’m just going to stuff these envelopes. I’m going to mail them out and hope people call me.” Well, that’s busy. You can do that for 24 hours a day, but it’s got a low efficiency or hit rate. So, don’t confuse activity with efficiency. So, you need to ask yourself, what can I be doing that can make an impact now? In the immortal words of Pink Floyd, “How can you have your pudding if you don't eat your meat?” There's a lot of things that you have to do every day. And I think we all get in the habit of doing things that are easy or that we like. Could you imagine what it would be like if you took on the challenge first? And how much more progress you would make?

Will McKenna: No, that's great. Anytime we can quote Pink Floyd on our podcast, I'm delighted. So, thank you for that. And take us maybe a little into some more specifics or an example of that, or give us a sense of how you spend a week. What does that look like in real life for you?

Greg Mendoza: I think we all need to try to achieve a work-life balance, but my days start early. I take some time in the morning for myself; I'm an avid exerciser. I like to exercise in a million different ways. And I'll do it, and then I like to get to work as quickly as I can. If it’s a Monday, the night before, I want to prep and know what I’ve got. If not, I’m not sleeping well, I don’t know where I’m going to start. So, every night before a workday, I try and look at my calendar ahead and figure out what needs to get done. That way, I'm prepared. Even in this remote environment, we have weekly and daily interaction with each other. We're constantly communicating. We maintain a spreadsheet and communicate amongst and intra, within our group, about initiatives with existing clients, new onboarding procedures that are mandatory. Again, we have a process in place, so that everybody knows what needs to get done. The more you can hardwire into your schedule ... It sounds counterintuitive … but the more time I consume, I find the more time I have, because it makes me manage my time a little better. So, hardwire everything you can, have routines, and that just helps you; you're not struggling along the way because, you know, there's some predictability.

Will McKenna: What advice would you give a young planner looking to get in the business, or to other fellow advisors who are looking to grow their practice to the level that you've achieved here?

Greg Mendoza: Well, the first thing I would say is: You really can't do it alone. There's only so much time in the day. And we as a team would not be nearly as successful as we are, if we were all on our own. So, you've got to choose very wisely who you partner with, both externally and internally. My first few years in the business, I was approached by a considerable number of FAs in the office who had a lot more length of service and experience to try and partner with them. And it just didn't seem right at the time. And then I happen to be asked to work on a 401(k) plan with an existing FA in my office. We had no intentions of getting together, but we found out that there was great synergy. And it was five or six years into my practice of being a solo advisor, we formed a team. And it was three of us at that point in time. Then we hired our CFA, our portfolio strategist, and the business has grown considerably since then. So, you can't do it all on your own. I think you need to be willing to invest in your practice, both time-wise and monetarily. Good people are not inexpensive. But you'd be surprised. It's not just compensation. There's psychological compensation; there's feeling valued. It's human nature, we sometimes make it too complicated: Treat people the way you would want to be treated, make them feel valued, thank and reward them in many, many ways. And that's one way to grow the team, because you just can't really do it all on your own.

Will McKenna: That's awesome. Any final thoughts?

Greg Mendoza: What I love about the retirement plan business, it's constantly changing. It's a wonderful area with tons of opportunity. With all due respect, there are a lot of plans out there that can benefit, whether it be a more robust investment process, better investment menu, better employee, or participant communications and education, lower plan fees, lower plan costs. When you wrap your arms around all of that, it's very simple. If you can improve a plan, you get better long-term investment results, and you have better participant outcomes. So, we wake up every day and we say to ourselves, “You know what? We believe in our heart of hearts that these participants are far better off because we work on this plan than they would be on their own.” So that's pretty empowering. It feels good to do good. Doesn't mean it's not hard along the way, and there's not challenges, and you want to pull your hair out. But that's my, that's the only answer I got.

Will McKenna: That's great. Well, that's an excellent place to end. Thank you so much, Greg Mendoza, for joining the PracticeLab podcast.

Greg Mendoza: My pleasure. Thank you for having me. Thanks for all you do.

Will McKenna: OK, so that wraps up this episode of the PracticeLab podcast.

Special thanks to Greg Mendoza for coming on the show. Thanks also to my colleagues, Andy Laskowski, Mike Bockstie and Brendan Mahoney, for connecting me with Greg.

If you liked what you heard today, please hit the subscribe button and consider leaving a rating and review since that helps other advisors find the program. PracticeLab is brought to you by Capital Group. You can find all our episodes at practicelab.com. Hope you enjoyed what you heard today, and I look forward to joining you on the next episode of the PracticeLab podcast.

Closing disclosure (audio)

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