Selling Safe Harbor Plans: 3 Mistakes Advisors Make

Safe Harbor 401(k) plans can be your secret weapon for growing your business and satisfying your client base, because companies like the simplicity of their administration. It’s all in the way you pitch them. The catch is that there’s a deadline, October 1^st, to get your clients set up with a safe harbor plan. That means the pressure is on to inform them about these game-changing plans and close the deals in a timely manner.

To set you up for success, we’ve pinpointed a few common mistakes to avoid and given you a few practices to adopt.

Key Takeaways:

• Don’t use outdated scripts, appeal to your clients’ specific needs like satisfying retirement plan requirements.
• Don’t assume that a safe harbor 401(k) plan is right for all businesses; target the appropriate clients.
• Don’t forget to highlight the major selling points: compliance test exemption and potential tax credits.

Using outdated scripts:

When consulting with existing and prospective clients, don’t resort to the same old lengthy cold calls where you introduce yourself and assume the client’s needs before even asking them. Instead, throw the rule book away. Schedule an in-person consultation with them and have a compassionate conversation.

Discuss their specific needs and pain points. Will a safe harbor 401(k) plan effectively address them? As their trusted advisor, securing a valuable retirement plan for their businesses before October 1^st and ahead of potential state retirement plan mandates should be your top priority. Be prepared to offer them exceptional retirement plan solutions. And don’t hesitate to answer any questions or concerns, demonstrating that you’re their expert guide—always there to lead them in the right direction.

Making assumptions

As beneficial as safe harbor 401(k) plans are, not every client will be your target customer. Certain business owners may not be interested in taking on the responsibilities of a safe harbor 401(k) plan, such as mandatory employer contributions and immediate vesting

This may be especially true for businesses with high turnover rates. Companies may feel uneasy about contributing funds to an employee’s account and allowing them immediate vesting if they don’t plan to stick around. Because of this, these business owners may prefer the structure of a traditional 401(k) plan, which is just fine.

 Focus your efforts on the right audience, business owners who want:

• To increase company loyalty
• Hire competitively
• Skip burdensome compliance testing
• And still enjoy simple plan management

These are the clients who are ready to take advantage of a safe harbor 401(k) plan.

Failing to communicate plan benefits:

A seasoned advisor like you understands the advantages of a safe harbor 401(k) plan; but do your clients? Underselling the plan’s benefits is another mistake to avoid. It isn’t just another retirement plan; it can also help businesses check off all their boxes. Let’s take a look at some of the factors that make a safe harbor 401(k) plan such a powerhouse option.

Business owners might appreciate these plan features and benefits:

• Exemption for certain compliance tests— A safe harbor plan isn’t subject to certain compliance tests such as top-heavy testing, ADP testing, and ACP testing.
• Easy plan setup— An ePlan Services safe harbor 401(k) plan can typically be set up within 15 minutes and funded within 24 hours.
• Potential tax credits— Business owners can receive potential tax credits for starting a new plan, making employer contributions, and adding an automatic enrollment feature.
• Attract and retain employees— Factors like employer matching and 100% immediate vesting can be attractive to current and future employees.
• Satisfies potential state mandates— Many states require business owners to register for a qualifying savings program or face expensive fines. Establishing a safe harbor 401(k) plan by October 1^st can help your clients stay ahead of the curve.  

Too many advisors fail to highlight the benefits that employers care about most. But you don’t have to become one of them. Consider keeping these plan features within arm’s reach when selling safe harbor 401(k) plans.

Conclusion:

You, as an experienced advisor, are well aware of how safe harbor 401(k) plans can positively affect a business. Your clients should be too! Don’t let common mistakes like impersonal sales pitches, incorrect assumptions, and ineffective communication of plan benefits cost you lucrative sales opportunities. Safeguard your success with this helpful guide.