401k Prospecting Success

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Aug 27, 2007 12:24 pm

For the most part, I think 401k prospecting can be elephant hunting.  And not all that rewarding.  BUT, what the heck, can someone share successes in this area with us.  How did you get them to let you review their plan?  What sold them on switching to you.

Aug 27, 2007 1:44 pm

They switched to get into a fee based model & better service issues. Also being indy no proprietary products and no affiliation with a big wirehouse or insurance company.   

Aug 27, 2007 3:22 pm

For the most part, 401(k) service is terrible, unless you are dealing with a major TPA (i.e. Hewitt, etc.).  Often, small 401K's are sold and then forgotton, except maybe for an annual fiduciary meeting.


So, it is easy to pluck these from small to medium sized businesses just based on service.  Just ask them, they are more than happy to tell you how bad the service is.


And, if you know what you are doing, you can pull apart a 401K plan and show all the ridiculously high fees embedded in some of them.  Not to say that they should be "free", but often (normally in the group annuity plans) the expenses and fees can run upwards of 2.5 - 3%, and that doesn't always include the TPA.  And of course, they think they are "free".  Many of the point people don't even realize they are in group annuity plans until you point it out to them (pretty much most of the plans run by insurance vendors use them).


To me, it's free prospecting.  If you land some decent plans and service them right, you will get access to all the participants (remember, people have spouses, so don't write them off becuase they have lower paying jobs). 


With the smaller businesses, it can give you access to the owners' personal stuff as well.


And, if you can get 50-100 bips on the assets, the plans can add up.  You just have to make sure it is worth it for you if you are going to actually service them.  It's tough to do it for only 25 bips unless you are getting something up front, the plan is really large, or you have access to some wealthy people in the plan.

Aug 27, 2007 6:33 pm

LONG lead times, and screwy decision making processes in changing/moving these. Don't do it in the first couple of years in the biz because you won't be able to be consistent with the activity.

Aug 28, 2007 10:08 am

Good information from Ashland and Broker24.  I am dialing, mailing, dialing again.  Trying to be smart about the plans I am going after.  No luck yet.

Aug 28, 2007 12:57 pm

I've had some luck managing 401k assets on a fee basis. I don't go after plans but individual employees. You can help them manage the money without having to roll it over. Some 401k's have a self-directed brokerage option also, so we can use ETFs and stocks. You can charge them a monthly fee, some flat ($50/mo charged to CC) and some asset-based (1%).


Many plan administrators will allow billing fees on a pre-tax basis, so there's no penalty.


I'm still learning alot about this type of business, but there's no one out there doing it...

Aug 28, 2007 1:19 pm

This is just my opinion and based on my experience, but 401K prospecting in the first 5 years or so is a losing effort... It tkaes too long to have business hit the books unless you find a deal at the absolute perfect time.


Try prospecting companies in your area that allow for in-service distributions. It allows you to move 401K monies into a Rollover IRA while the employess still works there.. Most people dont know about that option, and more and more companies are now allowing it (basically to become less liable- i.e Enron, Worldcom, etc)

Aug 29, 2007 10:25 pm
blarmston:

This is just my opinion and based on my

experience, but 401K prospecting in the first 5 years or so is a losing

effort... It tkaes too long to have business hit the books unless you find a

deal at the absolute perfect time.



Try prospecting companies in your area that allow for in-service

distributions. It allows you to move 401K monies into a Rollover IRA while

the employess still works there.. Most people dont know about that

option, and more and more companies are now allowing it (basically to

become less liable- i.e Enron, Worldcom, etc)





Both good points. However, I would spend a few hours a week in the

early years prospecting for them so that you can get some on the books

(not enough to detract from individual prospects). That way you can

learn the business and get a few on the books.



The in-service rollovers are HUGE if you have a big local company that

allows them. I have a list of all the companies that offer them, but I

honestly don't know where I got it. I think someone else in my firm gave

it to me. There are 2 big companies in my area that allow them, and that

is a big part of my business (total of about 15,000 employees between

both companies).

Aug 30, 2007 12:56 am
EDJ to RIA:

I've had some luck managing 401k assets on a fee
basis. I don't go after plans but individual employees. You
can help them manage the money without having to roll it over.
Some 401k's have a self-directed brokerage option also, so we can use
ETFs and stocks. You can charge them a monthly fee, some flat ($50/mo
charged to CC) and some asset-based (1%).


Many plan administrators will allow billing fees on a pre-tax basis, so there's no penalty.


I'm still learning alot about this type of business, but there's no one out there doing it...





Alot of my work is along those lines. Basicly helping people use rhe
401K plan better. There isn't any investment with as good returns as
the employer matching plan.



Alot of 401(k) plans only offer a limited menu of funds/asset classes.
So there is a big niche in helping people with complimentary
investments outside of the 401k. E.g the 401K doesn't offer TIPS, put
them in a roth. etc etc.



Also, some of the plans like JPMorgan, have auto asset allocation for
like 35bp ontop of the existing funds. Very easy to help people do that
for themselves and turn off the JPM meter.

Aug 30, 2007 7:58 am


Alot of my work is along those lines. Basicly helping people use rhe 401K plan better. There isn't any investment with as good returns as the employer matching plan.

Alot of 401(k) plans only offer a limited menu of funds/asset classes. So there is a big niche in helping people with complimentary investments outside of the 401k. E.g the 401K doesn't offer TIPS, put them in a roth. etc etc.

Also, some of the plans like JPMorgan, have auto asset allocation for like 35bp ontop of the existing funds. Very easy to help people do that for themselves and turn off the JPM meter.



What a great post--filled with information and suggestions.


You know something.  Over on that other forum--the clubhouse with its secret handshake and back slapping--they are running a poll to see if AllREIT should even be allowed to post there.

Aug 30, 2007 8:23 am

The problem is, for every good post AllReit has, he's got ten which are completely ignorant and biased towards how he does business. 

Aug 30, 2007 8:26 am

Over on that other forum--the clubhouse with its secret handshake and back slapping--they are running a poll to see if AllREIT should even be allowed to post there.


Which forum is that?  Do you mean regreps.com?  Isn't that the one that won't allow you, Nancy, and William to participate?  Just in case you are talking about regreps.com, let me fill everybody in on the secret handshake.  If your name is not Nancy, William, or Putsy, you can't post.   Everyone else is welcome.

Aug 30, 2007 11:01 am
deekay:

The problem is, for every good post AllReit has, he's got
ten which are completely ignorant and biased towards how he does
business. 





DK, those in glass houses shouldn't throw stones.

Aug 30, 2007 4:28 pm

I don't find AllREIT that bad.  Yes, he has an agenda because of the way his business is structured, but so do the rest of us.  I don't agree with his style of money management; however, at least he can back up what he says with some facts.  He's not just regurgitating Googled info like the trolls.

Sep 14, 2007 7:28 pm

Allreit knows what the hell he is talking about.

Sep 14, 2007 8:51 pm
troll:

[What a great post--filled with information and suggestions.


You know something.  Over on that other forum--the clubhouse with its secret handshake and back slapping--they are running a poll to see if AllREIT should even be allowed to post there.



Lets make one thing perfectly clear, you trolls - all three of you with your 300 different names, created that other forum. Its only because of you that 172 folks as of this minute, myself included, went to that forum.


Now, regarding 401k's


It is a mystery to me why more FA;s dont focus on this business. It is the greatest business you can get - asset flows, trails, a boatload of warm leads, and if you deal with the right provider, a nice upfront ticket on the takeover assets. What other type of business can give you all that?


Yes, its a long lead time, but anyone willing to work hard to grow their practice, can find an hour a day (8-9AM is best) to cold prospct business owners on this, without giving up the quick lead time opportunity of calling individuals. I have a number of clients whom I've cold called on a 401k review, where I didnt get the plan, but the owner or person I got on the phone, CFO, etc became a client. Eventually that obviously leads to 401k opportunity later.


Spend time looking for mid size plans (1-5 million) that are with an insurance co. Most of the time they are annuity wraps. You can take that plan with ease, if you can get the appointment. There are m&e charges the plan sponsor usually doesnt even know about. The one caveat - if the plan is just a few years old, there will likely be back end charges to terminate.


Success story-


Cold called a plan 3 years ago - they were with an insurance co. CFO got on the phone and it went like this:
after my initial pitch, offering a review of their plan:


them: Sorry I have no interest we are very happy with our plan and wouldnt change. We have been with them for 8 years


me: I can appreciate that, and I dont want to interfere if you are totally satisfied - but before I let you go, do you mind if I ask one question?


them, go ahead


Me: is your plan currently with an insurance co?


them: yes its XXX


Me: thats where I have the most success in helping people like you-do me a favor - no do us both a favor- give me a 15 minute appointment, I promise not one minute more - have your summary plan doc and an enrollment book with you. I just want to learn about your plan. I will then go back to my office and within one week, if i cant come up with a plan that will not just be better, but substantially better, i promise i will call you and tell you, and we'll part friends.


I got the appontment and sure enough - m&e charges that the employer knew nothing about, shitty proprietary funds, and no service. 6 months later, they signed the papers - $2MM+ WITH 30K flows per month on which I get 1% plus trails.


The funny thing is the day they signed the papers, they told me that while they realize I am bringing them a better plan, the biggest reason they are changing is because when they set up the plan 8 years ago, the broker came in and did an enrollment meeting, and they havent heard from him since. Thats another hot button.


Hope this helps someone.

Sep 15, 2007 7:38 pm

    Good post, dude!

Sep 18, 2007 9:57 am
pratoman:
troll:

[What a great post--filled with information and suggestions.


You know something.  Over on that other forum--the clubhouse with its secret handshake and back slapping--they are running a poll to see if AllREIT should even be allowed to post there.



Lets make one thing perfectly clear, you trolls - all three of you with your 300 different names, created that other forum. Its only because of you that 172 folks as of this minute, myself included, went to that forum.


Now, regarding 401k's


It is a mystery to me why more FA;s dont focus on this business. It is the greatest business you can get - asset flows, trails, a boatload of warm leads, and if you deal with the right provider, a nice upfront ticket on the takeover assets. What other type of business can give you all that?


Yes, its a long lead time, but anyone willing to work hard to grow their practice, can find an hour a day (8-9AM is best) to cold prospct business owners on this, without giving up the quick lead time opportunity of calling individuals. I have a number of clients whom I've cold called on a 401k review, where I didnt get the plan, but the owner or person I got on the phone, CFO, etc became a client. Eventually that obviously leads to 401k opportunity later.


Spend time looking for mid size plans (1-5 million) that are with an insurance co. Most of the time they are annuity wraps. You can take that plan with ease, if you can get the appointment. There are m&e charges the plan sponsor usually doesnt even know about. The one caveat - if the plan is just a few years old, there will likely be back end charges to terminate.


Success story-


Cold called a plan 3 years ago - they were with an insurance co. CFO got on the phone and it went like this:
after my initial pitch, offering a review of their plan:


them: Sorry I have no interest we are very happy with our plan and wouldnt change. We have been with them for 8 years


me: I can appreciate that, and I dont want to interfere if you are totally satisfied - but before I let you go, do you mind if I ask one question?


them, go ahead


Me: is your plan currently with an insurance co?


them: yes its XXX


Me: thats where I have the most success in helping people like you-do me a favor - no do us both a favor- give me a 15 minute appointment, I promise not one minute more - have your summary plan doc and an enrollment book with you. I just want to learn about your plan. I will then go back to my office and within one week, if i cant come up with a plan that will not just be better, but substantially better, i promise i will call you and tell you, and we'll part friends.


I got the appontment and sure enough - m&e charges that the employer knew nothing about, shitty proprietary funds, and no service. 6 months later, they signed the papers - $2MM+ WITH 30K flows per month on which I get 1% plus trails.


The funny thing is the day they signed the papers, they told me that while they realize I am bringing them a better plan, the biggest reason they are changing is because when they set up the plan 8 years ago, the broker came in and did an enrollment meeting, and they havent heard from him since. Thats another hot button.


Hope this helps someone.



Dynamite POST.  But, what company are you using?  Most of them are insurance companies?  Lord Abbett?

Sep 18, 2007 9:29 pm

On this particular one I used Citistreet, (proprietary plan). Lately I have been working with Principal Financial, which has a non annuity product for mid size plans, and a great service model.

Sep 19, 2007 10:14 am

Thanks.  I like Principal too.