The 401(k) Business Keeping Up With the Times
by Cheryl Courtney

There was a time when only the unconventional financial advisors would consider going after 401(k) plans. The word on the street was that 401(k) plans were too complicated, involved too much work, and were too difficult to maintain. Even if any of these knocks against the 401(k) business were true at one time, to quote the great Mr. Dylan,” The times they are a-changin’.”
Some of the most seasoned financial advisors are pursuing 401(k) plans for their books of business and for good reason. The current economic uncertainty has affected the field in two big ways. Number one, many advisors are considering new options to make up for reduced assets under management. Secondly, many of the less-prepared 401(k) hunters have been unable to survive the current economy, leaving the field a little less crowded.

The Perpetual Story that Never Gets Old

There are a number of good reasons to put your efforts into the 401(k) market regardless of economic climates, advisor experience, or even your opinions about conventionality. Take a look at the following important chapters of the perpetual story that is the 401(k) business:

A Perpetual, Direct Source Of Income

Not every sponsor is experiencing the plan participation they’d like right now and some may have reduced or even cut their matching contributions. However, -employers will offer a retirement plan as long as they want to attract and retain quality employees. And as long as those employers maintain that 401(k) plan you, as the advisor of record, will get a monthly commission on the plan regardless of the amount of assets in the plan or even the amount of return on the investment. And that means a perpetual source of income.

Access to the C level

When you introduce a company to a 401(k) plan, more often than not, you are being introduced to the plan fiduciaries -- the CEO, CFO, or other C-level employees. Once you’ve established a relationship with these senior management employees, the door is wide open for discussion about not only about individual accounts, but also about additional corporate business, such as cash management accounts, options business, and more. Not to mention the fact that if any of these C-level -employees change companies, you have an automatic entrée into that business as well. It’s like a self-perpetuating list of contacts.

Access to a Built-In Expanded Audience

Another great benefit of selling 401(k) plans is the access to a large audience of prospects. Let’s say you attend an all-employee enrollment meeting. Your very presence automatically establishes you as a financial expert. Guess who they’ll turn to if some of those many employees ever need help responding to a sudden windfall or even rolling over their 401(k) once they terminate their employment -- you, of course. It’s a case of business perpetually (there’s that word again) creating more business.

The Up-to-date Approach

Now that the many reasons clear for why you might be interested in the 401(k) business, how do you separate yourself from your competition to become a success in 401(k) plan sales? The answer lies in widening your focus. Many less-seasoned financial advisors often make the mistake of trying to sell a plan based on one thing -- usually cost. That might work in a few situations if you’re lucky, but it won’t offer you the consistent, enduring, and expanding success you’re striving for.

Four Steps to 401(k) Success

To be truly successful in the 401(k) market, you need to assess your prospect’s needs. Asking questions, reviewing the current plan, and doing a little research will help you discover what real value you can bring. The best way to achieve this kind of discovery is to concentrate of four main fronts.

I. Investments – The most natural place to begin is to review a plan’s investments. Prospects are eager to learn how their current investments stack up against what you can offer. Before you offer any comparisons, you must review the plan’s statement of assets, which includes the following:
• List of investments
• Allocation of assets
• The plan’s share class of funds
• The funds’ expense ratios

You can only comment on how they are meeting the plan’s needs after you know everything you need to know about their current investments.

II. Plan Design – With so much attention on cost and performance, it can be easy to overlook a truly basic question: What does the prospect want the plan to achieve? For many, offering a 401(k) plan is a way to reward their employees; others are looking to attract employees while others are more interested in maximizing the advantages for the business owners. At the center of it all is the fact that a plan’s most basic function is to serve as a tax-advantaged program.
Whatever the plan’s main goal, it all comes down to plan design -- working with the prospect to create a plan that succeeds in its intended purpose and remains compliant. This is where brokers who work with third party administrators (TPAs) have a distinct advantage. TPAs can -provide brokers with an additional level of expertise in plan design to help prospects configure the most effective plan and still meet ERISA’s often-complex guidelines.

III. Administration – TPAs are a great asset in another important area as well – plan administration. You’re that much closer to getting your prospect’s business when you find out how you, as a broker, can make the day-to-day operation of their plan less time consuming, less challenging, and more accurate than ever.

IV. Employee Education and --Communication – What good is a quality plan with great-performing investments if no one’s interested in participating? That is precisely why providing participant communication and education is such an important aspect of 401(k) plan sales. Let prospects know that you can provide bilingual enrollment meetings or use additional educational materials to reach employees at multiple locations and increase plan participation across the board.

Commitment Never Goes Out of Style

Of course, walking in the room, covering four simple points, making the sale, and never looking back isn’t going to help you take full advantage of the opportunities of 401(k) sales. Success in the 401(k) market means committing to a set of best practices:
• Offer well-researched solutions instead of quick sales. Ask the hard questions and use your resources to provide the right answers.
• Establish yourself as a financial expert, not just a salesperson. That means helping with enrollment, offering quality investment reviews, conducting annual plan reviews to see how their needs have changed, and presenting a calendar of educational seminars for employees.
• Support clients’ needs with education and assistance in areas, such as fee -transparency and meeting fiduciary requirements.

All the Latest Tools for Success

The tools and resources are there to make it practically a turnkey approach to 401(k) success. Quality TPAs offer plan design expertise and administrative support at your fingertips. Sometimes, just offering access to quality participation and education materials is all it takes to make you a hero to many of you prospects. And think how relieved clients will be to learn that the funds in their line-up are subject to stringent and ongoing monitoring? Better yet, what sponsor wouldn’t want the peace of mind that only a fiduciary management program and guarantee can provide? That’s the peace of mind that you can provide.

So if you haven’t considered adding 401(k) plans to your business or you’re still listening to Bob Dylan on vinyl, now may be the time to catch up to the 401(k) market and your full potential for success.
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Cheryl Courtney is a regional vice president for Transamerica Retirement Services. She has worked with advisors in the Northern Los Angeles Territory for Transamerica Retirement Services for the past 5 years and has been in the financial services industry for more than 20 years.