How Elite Advisors Target the $10mm+ Retirement Plan Market

Many financial advisors and bank trustees have found success in the small 401(k) market. In most cases, the decision to hire an advisor is built on a previous business or personal relationship with the business owner. Cost and investment choices drive the decision-making process as far as which plan provider to select. Value added services such as 3(16) outsourcing and financial wellness programs are not a critical element with these smaller plans.

Recent disruption in the upper end of the small-mid size plan market has created greater opportunity for specialist advisors to capture larger plan business. Plan provider mergers, fee compression, and the move to more passive fund lineups have upset the traditional business model of the investment-based provider. As a result, these providers have reduced services and increased cross-selling activities in an effort to make up the losses. Proprietary products can no longer be counted on the overcome losses in recordkeeping services.

Recent disruption in the upper end of the small-mid size plan market has created greater opportunity for specialist advisors to capture larger plan business.

This has created an opportunity for elite advisors to bring a fresh approach to these plans including new tools and services customized to meet the needs of plan sponsors and their employees. Here are a few approaches elite advisors have used to successfully replace the incumbent advisor:

Plan Wellness

Is the plan meeting the goals of the employer and employees? Is there a retirement readiness process in place to gauge if employees are on track? If the employer does not already have a financial wellness program in place, can the recordkeeper offer one that is integrated with the retirement plan? Elite advisors offer additional tools to help with employee engagement such as workshops, seminars, webinars and one-on-one meetings with employees. Here it is important for the advisor to fully communicate their value proposition to the potential client and deliver on those promises.

Investment Monitoring

Today it is more critical that advisors offer a broad selection of investments, including funds, CITs, and managed accounts. Eliminating proprietary funds and funds with revenue sharing will help keep the employer out of the sights of litigators. Most elite advisors provide 3(38) investment management services to reduce the plan sponsor’s liability and streamline the investment selection and monitoring process. If you do not or cannot offer this service, you should partner with a firm that can. Employers are saying they do not have the time or expertise to monitor investments and are concerned with liability.

Plan Compliance

Employers are looking to the advisor to help assure maximum plan compliance and best design. If the employer does not have a strong internal process in place, it might make sense to outsource as much of the day-to-day compliance decision making process in the form of 3(16) administration services. Many of the errors that employers are required to fix under ERISA involve eligibility, vesting, automatic enrollment and accurate distribution processing. If it is possible to have the recordkeeper take on many of these tasks including scrubbing each pay roll deposit for errors, it could save the employer thousands of dollars of potential fines, corrective contributions and penalties. If employees are not saving enough or not saving at all, plan design tools such as auto-enrollment and auto-escalation should be offered along with a robust education program.

Benchmarking

Employers want to know they are paying a reasonable price for the services they receive. They look to the advisor to help with this process and provide objective advice. As the plan grows, some fees can grow quickly and should be reduced if there is not a corresponding increase in services. Employers are also concerned their plan is competitive in their industry and can be used to attract and retain key talent. Here a targeted benchmark study can be done to include their industry group. As fund expenses continue to see downward pressure, it is prudent to explore institutional class shares as potential replacements for retail funds. Collective Investment Trusts (CITs) may also offer lower cost alternatives. More and more investment managers are rolling out CIT versions of their retail funds with low or no minimums.

Plan Design

As the company grows, their needs may change. Does it make since to consider an ESOP or Cash Balance plan? Maybe a non-qualified plan for key executives. Do they need to offer an HSA, VEBA or HRA program? Have they acquired other companies that may or may not create a controlled group? If you do not have expertise in these areas, you will want to partner with a recordkeeper that does. The merger of health and wealth services has opened the opportunity for many advisors to fill the gap created by service firms that only offer one or the other.

Specialist 401(k) advisors continue to increase assets under management by creating custom services to manage plans under advisement. Those that recognize the trends in the marketplace and develop strategies to address employer concerns will find continued success.

Joe Long, CEBS, CPC, QPA, QPFC, AIF is an external wholesaler with BPAS, a national retirement plan recordkeeping, actuarial and administrative services provider, based in Utica, New York. Joe has over 30 years experience working with small business defined contribution and defined benefit plans.