A Financial Advisors’ Guide to Selling Small Business Retirement Plans

Presenting your clients with retirement plans that meet the needs of their businesses sounds like an easy enough task, but you may encounter sticking points along the way. Perhaps your clients already sponsor a plan, or they may think that a state-administered IRA is their only option. To help your existing clients make smart decisions while also fostering relationships with potential prospects, take these factors into account.

Key Takeaways:

• Determine if your clients currently sponsor retirement plans.
• Learn as much as possible about their state’s retirement plan mandate (if they have one in place).
• Find out if your client or prospect likes their existing plan.
• If possible, get a copy of your client’s 401(k) statement.
• If your clients sponsor a plan, ask for a copy of their fee disclosure.
• Review their investment summary to get an idea of their best options.
• Don’t miss out on opportunities to promote your other services.

Find out if your clients are enrolled in a retirement plan

If your clients don’t currently offer retirement plans, now is the time to explain that their state may soon require them to provide their employees access to a retirement savings program. Currently, over 20 states have proposed legislation while 11 have active savings plan mandates, (California, Connecticut, Colorado, Delaware, Illinois, Maine, Maryland, Massachusetts, New Jersey, Oregon, and Virginia,)

It’s your duty to help ensure they remain in compliance with state laws, avoiding potentially costly fines. While states are offering IRAs to give workers access to retirement savings, this may not be the best plan for your clients’ needs. You can seize the opportunity to explain the benefits of offering their employees a retirement savings option that also provides the following benefits:

• Tax credits: Business owners can earn tax credits for starting a new plan, adding an automatic enrollment feature, and making employer contributions. You can use the ePlan Services Tax Credit Estimator to project how much they may save.
• Meeting compliance standards: Adopting a plan can help keep your clients in compliance with state law.
• Employee attraction and retention: Potential and existing employees may feel a greater sense of loyalty to a company that is helping to secure their retirement future.

You may wonder, what if my client already sponsors a retirement plan? Sure, their plan may comply with state laws, but as a seasoned industry professional, this is your chance to get curious by asking the right questions and taking a look at their plan documents.

Ask if they like their retirement plan

It may seem obvious, but finding out if your potential client likes their current retirement plan can help determine if you’d be able to sell them a new one. If they are happy with their current plan, take a look at their plan features and learn exactly which ones bring their business value.

If your prospective client doesn’t like their current plan, you’re suddenly presented with the opportunity to sell them a plan that meets their particular needs. You might advise them to consider an ePlan Services 401(k) or safe harbor 401(k) plan. Both of these will satisfy mandate requirements and include employer matching options. However, the difference between the two is a safe harbor plan will exempt your client’s plans from certain non-discrimination tests and simplify annual compliance testing.

Most business owners may not take the time to think about how they feel about their plan, but because you’re committed to keeping their best interest in mind, you have. Asking them if they like their retirement plan may give you a chance to connect with your client on a deeper level and hopefully gain their trust and loyalty as a result.

Study their state’s potential plan mandate

Does your client live in a state with an existing or upcoming retirement plan mandate? A state-administered savings program may satisfy their legal obligation, but it may not be their best option.

It will work in your favor to gain a thorough understanding of their state’s requirements so you can offer them the best plan for their money. For instance, state IRAs have lower contribution limits than a 401(k) retirement plan. Also, state-administered retirement programs do not permit employer matching contributions. For more information, check out our article on this topic here. Knowing the right plan to suggest to your clients can position you as the expert and cement your reputation of excellence.

Read their Summary Plan Description

If your client or prospective client sponsors a retirement plan, ask them for their Summary Plan Description, (SPD). When enrolling in any retirement plan, the business owner should receive this document. An SPD details information such as:

• The name and type of plan they’ve adopted.
• The plan’s eligibility requirements.
• The participants’ rights regarding benefits.
• Source of plan contributions and how those contributions are calculated.

Looking at this information can be useful to you as an advisor because it will give you insight into what your client’s plan offers and covers. With this information, you can benchmark your client’s plan to determine if you can make them a more competitive offer that’s more beneficial for them and their employees

Review their 401(k) Statement:

Your busy clients may not have enough time in their packed schedules to read their 401(k) statements. However, they should understand their statement details because it provides necessary information regarding the amount of money they’ve accumulated and how much they pay in plan fees. As their financial advisor, you can review the information with them and help them determine if any adjustments should be made. Specific information outlined in your client’s 401(k) statement may include:

• Account balance: Displays the total amount of money they’ve accumulated over time.
• Asset allocation: Breaks down investments across stocks, bonds, and cash.
• Fees: Details plan admin fees and other expenses.
• Performance: Shows client rate of return for the last 12 months.

Ask for a copy of their fee disclosure Your client’s fee disclosure will show you the fee structure of their plan. It can be broken down into asset-based (amount of assets in the plan), per-person based (number of plan participants), transaction-based (the execution of the plan service), and flat-rate (fixed charge, despite plan size) calculations. Reviewing this document will allow you to compare their fees with competitors and ensure that they are getting the most benefits for their money. If you discover that they’re paying unnecessary fees, you can build a value proposition around that!

Evaluate their investment summary

Another document you’ll want to read through carefully is your client’s investment summary. This is where you’ll see a breakdown of their investment options. In some cases, record keepers may limit your customers’ ability to invest in the funds they want. Your clients may even be charged an extra fee to do so.

You may be able to address this issue in your conversations by helping them choose a 401(k) record keeper that’s a better fit with their investment needs, such as ePlan Services. The ePlan Services platform is revenue-agnostic, allowing clients to invest as they desire without hidden fees. You will be provided with complete fee transparency. Not only that, but you can also assure them that the ePlan Services team will walk them through every aspect of their plan selection process to ensure that they understand all the options available to them.

Capitalize on other sales opportunities

Conversations around the value of a small business retirement plan may provide opportunities to pitch your prospects on other valuable services such as wealth management. In return, if your wealth management clients are small business owners, this relationship may lead to lucrative opportunities to sell retirement plans.

Consider that with every ten retirement plan conversations you have with current and potential clients (small business owners), there may be an opportunity to convert at least one of them into a wealth management prospect. That’s a lot of potential income to leave on the table!

Working with ePlan Services to provide your clients with an entire suite of diverse services can make it difficult for other financial advisors to compete with you. Don’t pass up your chance to rise above the competition and sell small business retirement plans that your clients can depend on.

Conclusion:

Whether your clients have adopted retirement plans or not, it’s up to you to help ensure that they have adopted a program that benefits their businesses and their employees. When consulting with your clients or prospective clients, addressing the subjects mentioned earlier can help you get a better understanding of exactly what they need.

ePlan Services retirement plans not only provide the opportunity to receive beneficial tax credits, but they also offer higher contribution limits than IRAs, allow employer contributions, and have flexibility to make changes.