micro scope | PLANADVISER March/April 2016

Getting Personal

The pros and cons of taking on a retirement plan from someone you know

By Jill Cornfield | March/April 2016
Page 1 of 3
Art by Melinda Beck A retirement plan adviser finds out that a golf buddy or member of the same club or religious organization needs help with a company retirement plan. It might seem like a simple and streamlined way to pick up new business, and the benefits are obvious: increased revenues, plus the satisfaction of helping out a contact or friend.

Most retirement plan business is done via relationships to some extent, points out Ronald Joyce, vice president of IVC Wealth Advisors in Silverdale, Pennsylvania. “For example, I meet a plan sponsor at a Chamber of Commerce [function],” he says, “or I am introduced to someone via a mutual friend.” The key is to build trust with the one or two people who own and operate the plan, Joyce says.

Micro plans are a great way to gather assets and help guide friends or associates through the intricacies of the Employee Retirement Income Security Act (ERISA), according to Ryan Mumy, president and founder of Mumy Financial Advisors LLC in Hickory, North Carolina. “Most business owners aren’t paying attention, as it’s a non-revenue-producing activity,” he says. “Offering a solution that reduces their time liability, rather than [merely] selling a product to a plan sponsor, is a great way to get a client for life.”

But doing business with an acquaintance, friend or relative can easily become a minefield.

Plans taken on through personal relationships may have been inexpertly run by another acquaintance or a relative of the plan sponsor. It can make for an uncomfortable situation when the experienced adviser steps in and finds a plan in disarray and has to call this to the sponsor’s attention.

Coming into a plan that has irregularities requires diplomacy, says Tim Wood, principal of Foster & Wood in Portland, Oregon, but there are effective approaches. “It’s awkward,” he says. “No one wants to be told his past decisions were silly or uninformed. The way I do it now is to ask probing questions. ‘Why did you include this fund? Do you know that this fund holds 80% of its money in junk bonds?’ I try to tell a story and ask them questions.”