EJ selling 401k plans to small biz owners
Does anyone know how successful an EJ rep could be in selling 401k plans to small business owners? How might the EJ rep get compensated for this?
A fair amount of work, and <40% payout on 10 or so people kicking in $75 a
month into mutual funds?
Do the math.
10 people x $75/mth x 5% commission x 38% payout = $14.25 per month.
If you were Indy you would make more like $30 a month on that!
We do a lot of them out of my office. There is some work involved, but you have to look at the big picture. We usually do this in order to get to the owners personal accounts. You can design a plan that is significantly less expensive than most plans out there (as most people are trying to make their basis points off the plan) and is appealing to the owner. In the process, you get to work with them.
The key is that you analyze each componant of the plan (Admin, recordkeeping, $$ management, employee education, etc.). You can just become broker of record, but keep the money manager and record keeper, or hire a new money manager, whatever. Just remember, small 401k's will not make you much money anywhere (unless you are one to try to gouge with fees). The key is that it gets you an entre to the owners personal finances (and maybe a few other people in the firm with money).
I opened a 401(k) for a company right after I got licensed and took over my office, and I thought I had hit a gold mine right out of the starting gates.
However, that all changed when I later realized that I was going to net $8 monthly from the entire 401(k).
I found that I couldn't compete with some other 401k plans out there because the "preferred" plan specifically the Hartford group annuity 401K that was made for Jones only contained the preferred funds. The same Hartford chassis offered by the rest of the investment world contained many other fund families. In addition the gross pay out on the non Jones 401K was much higher.
To small business owners, I would go with the Owner or Individual K plans (if they qualify) that available from various mutual funds. You have a lot of funds that are not just the preferred families. Check them out. Call your wholesalers or the companies directly.
In fact in the last few days of '06, I was busy opening 5 different plans,some with 2 participants each (spouses) that each person will be funding with at least 25K before their tax deadline.
Bigger plans that require a TPA can be a lot of work for a small return. Look at Simple IRA plans.
I agree with Babs, although the options have improved with hartford, Lord Abbett, and American (they just brought theirs back). I still maintain, though, that you should have a strategy to either make money on the 401(k), OR, use it as a way to gain access to the owners personal stuff.