The third in a series of articles about working with small-business retirement plans
Selling retirement plans to small businesses can be an effective way to generate new business and an ongoing revenue stream. Yet, many advisers underestimate the need their clients’ employees have for ongoing support and guidance to make informed investment decisions that will ensure they maximize their plan’s benefits.
A Lack of Confidence
Given the gyrations in the financial market in recent years, investor confidence levels are on shaky ground. Looking at the results of a recent survey of employers, 54% said they are less confident about their employees’ ability to save enough for a secure retirement. In addition, only 18% were very confident that their employees would put aside enough money for retirement. Yet, at the same time, many employers are wary of providing investment advice, as they fear it could trigger lawsuits if their employees lose money.
Opportunities for Advisers
Advisers can play a key role in helping plan participants make informed investment decisions. For example, after closing a plan sale, advisers should take an active role in enrollment meetings to explain the plan’s features and benefits. Many employees are unaware of standard provisions such as automatic enrollment and automatic yearly percentage increases which can assist employees to maximize their retirement savings. Not only can this lead to higher participant rates, it also allows advisers to cross-sell their financial planning services for an employee’s non-retirement assets. Advisers can also host periodic educational meetings with employees, which may result in higher contribution amounts.
Leverage the Support Offered by Plan Providers
Of course, with a limited amount of time, some advisers may not be able to personally devote significant resources to assist plan participants. Fortunately, advisers can team up with a plan provider that offers regular communications and educational programs. These may include the following:
- Educational Seminars: Many plan sponsors have “libraries” of seminars that advisers can present, or that can be accessed by employees online. These may include topics such as asset allocation, portfolio diversification, international investing and market volatility.
- One-On-One Support: Certain plan sponsors have teams of nationwide education specialists who can conduct periodic enrollment and educational meetings, either onsite or in a webinar format.
- Newsletters: Most plan sponsors distribute newsletters to participants, typically on a quarterly basis. These newsletters often include updated plan information, as well as financial planning articles.
- Online Information: Plan participant websites often allow employees to make certain account transactions, research their investment options, and learn about timely issues related to the financial markets.
- Advice and Guidance: The plan sponsor may team up with a third party vendor that provides plan participants with investment “advice” and “guidance.” Investment advice is personalized in nature (i.e., managed accounts for a minimal fee), whereas guidance is more generic (i.e., free sample asset allocation pie charts for employees in different age groups). These vendors often are named as plan fiduciaries.
Regardless of whether the adviser uses a hands-on approach or serves in more of an advisory role, it’s imperative to have a well thought out plan to help participants make informed investment decisions. Not only will this increase participation rates, it will also help the adviser’s business-owner clients meet their fiduciary requirements.
The first article in this series related to small-company retirement plans, online here, discussed how advisers can educate employers about the importance of offering a plan and the most popular plan options for small businesses. The second article explained strategies to keep small businesses from eliminating their retirement plan. Click here to read this article.
John Guido is the Division Vice President, Marketing for ADP Retirement Service. In this capacity, he is responsible for oversight of ADP’s product and strategic initiatives in the retirement space. Prior to joining ADP, Guido held senior level marketing and sales roles at Metlife and Standard and Poor’s.
ADP Broker-Dealer, Inc., ADP, Inc. and their affiliates do not offer investment, tax or legal advice, and nothing in this article is intended to be, nor should be construed as, advice or a recommendation for a particular situation. Please have your clients consult with their own advisor for such advice.