Perspective: Strategies for Revenue Enhancement

Growth opportunities aren’t what they used to be in the retirement planning business.

Even though a recent study by McKinsey & Company predicted the defined contribution market will double in size, to $7.5-8.5 trillion, by 2015, those glory days seem a long way away.1 Today’s lackluster economy, poor stock market performance, and on-going consumer belt-tightening are putting the squeeze on retirement savings – and on the income of retirement planning professionals as well.

“With saturation in the 401(k) market and the difficulty of winning new plan business, it only makes sense to focus on maximizing revenue from existing participants,” says Bob Francis, Chief Operating Officer of National Retirement Partners, Inc. (NRP). “The good news is that there are two often-missed opportunities that plan advisers can use to increase revenue.’ These opportunities are:

  • Increase participant contributions. “People simply aren’t saving enough for retirement,” Francis explains, “and that’s not surprising, because most of them have no idea how much they should be contributing.” You’ll reap benefits by proactively reaching out to participants and offering education and guidance to help them make intelligent choices for retirement. As contributions increase, your income will, too. Developing a strong client bond will also lay the groundwork for more profitable business further down the line as they retire or change jobs.
  • Capture individual retirement account (IRA) rollovers. As Francis points out, “Plan participants are a phenomenal pool of prospects. But for the most part, providers are capturing very little of the assets that are rolled over from plans they service.” NRP offers its advisers an automated rollover program that they can offer to plan sponsor clients. Francis says this allows NRP firms to differentiate their practices while providing a valuable service at no cost to plan sponsors and participants.

There is a caveat to the above advice, however. Because of potential liability issues, an organized, professional, and objective approach is an absolute must. You may want to outsource the education, communication, and account transfer process if you don’t have the internal staff to manage it effectively.

Those liability issues include an ever-increasing threat of lawsuits. In one of the latest cases, two former 401(k) participants sued their plan provider over alleged improper practices involving rollover IRAs. The two employees say they were misled and encouraged to rollover their balances into high-fee funds. Because of this, the plaintiffs say they earned less and paid more than they should have.

While this case doesn’t include the plaintiffs’ employers as defendants, it’s not much of a leap to see that plan sponsors aren’t immune from this kind of legal action. With that in mind, take advantage of this prime opportunity to open the lines of communication and:

  • Educate your sponsors about the risks they face if they don’t properly manage their fiduciary responsibility;
  • Offer investment guidance and targeted retirement planning to plan participants; and
  • Provide terminating employees with impartial advice and a variety of quality IRA options.

In short, give your clients – both sponsors and participants – the kind of service they deserve. Look out for their interests and keep them up-to-date with regulatory changes and legal issues. By doing so, you’ll build your business and your profits.

Spencer Williams is President and CEO of RolloverSystems, an independent provider of rollover services. Over his career, Spencer’s experience spans starting, building and leading businesses in the financial services industry. Prior to joining RolloverSystems, Spencer served in numerous roles with MassMutual, including founder and CEO of Persumma Financial, LLC (a MassMutual Financial Group company) and as a leader in creating and building the company’s retirement income and rollover IRA lines of business.

© 2008 RolloverSystems, Inc. This article is protected by copyright law. Any redistribution or commercial use in whole or in part is strictly prohibited without the express written consent of RolloverSystems, Inc. The information provided herein is for educational and informational purposes only and should not be considered investment advice.


1. “Study: Defined contribution plans quickly changing,’ Dave Carpenter, The Associated Press, June 26, 2008