Magazine

micro scope | PLANADVISER March/April 2017

Thinking Efficiently

How retirement advisers can cultivate the small-plan market

By Rebecca Moore editors@planadviser.strategic-i.com | March/April 2017
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Art by Claire Merchlinsky

 Ask several advisers what the definition of a small retirement plan is and you will get different answers.

For example, at recordkeeper Ascensus, Kathleen Connelly, executive vice president, in Dresher, Pennsylvania, says she considers that market segment to be plans of $10 million or less, with those of $1 million or less being the micro plan market.

Adviser Jason Chepenik, managing partner of Chepenik Financial in Winter Park, Florida, however, considers any plan of $4 million or less as small.

Regardless of the specifics of size, serving this market requires an adviser to be far more proactive and hands-on than with larger plans.

Keith Clark, a partner at DWC ERISA Consultants in Minneapolis, and an adjunct professor at the University of Minnesota Carlson School of Management, says when it comes to the work of the plan, it might be less about assets than the number of participants. For example, once a plan exceeds 100 participants, a financial audit must be filed along with a Form 5500. Here, advisers can help retirement plans find a qualified auditor and guide them along the audit process.

Chepenik agrees that the number of employees in a plan can make a difference in adviser services. “If it’s a small company with 50 or fewer employees, the HR [human resources] person does payroll, bookkeeping and many other duties,” he says. “The person has no experience administering retirement plans. Advisers have to do a lot of teaching, directing them to [service providers] and keeping their stress down.”

He notes that sometimes the plan is small in assets but has hundreds of employees. “Usually, there’s a specific HR or payroll function for the plan. The adviser may still have to do some teaching, but it’s a little easier,” Chepenik says.

According to Connelly, that is the overwhelming difference between small and large plans; large plans typically have staff who focus on the retirement plan—people with knowledge, some level of expertise and an internal structure to support them.