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Mar 5, 2009 9:01 pm

Does anyone sell 401k plans to businesses?  Going in for an interview and am looking for any tips/advice that might give me a tiny advantage.

  Thanks in advance
Mar 6, 2009 1:45 am

I always ask a few standard questions.

1) What do you want to accomplish with the plan? Their answer can tell you how to direct the conversation from there. For instance, if the owner wants to put as much money away as possible, consider adding a profit sharing component. (I’ve had great success talking about New Comparability, by the way).

2) Ask if they know what they pay. More often than not, they have no idea.

Full fee disclosure is huge. Understand the Pension Protection Act of 2006 and what that meant for plans.

3) Ask if they have a Roth component. It can go on any plan, anyone can do it, but chances are, if they’re talking to you, their current advisor hasn’t told them about it.

4) Fiduciary liability can be a hot topic. But before you go there, make sure you understand it and can answer questions about it.

Is this a new plan or takeover? Depending on which, you’ll alter your questions somewhat. On a takeover, service will be the number one reason they’ll want to switch. On a new plan, service will be a strong consideration as to why they go with you.

Speaking of service: Sell your service model. Use this time as the perfect reason why they need a good advisor. “Sir/Ma’am, we haven’t seen this type of activity in our economy since 1931. Most of the people that lived through that are now gone, so this is brand new for just about everyone. People who thought they were doing the right thing have lost half their savings because they took the advice of the talking heads on television or their next door neighbor. I can’t guarantee you that the funds in your plan will outperform every year, but I can guarantee you that I will be on site (insert number here) times a year and help you and your employees make sense of what is happening and that you will have a clear understanding of the investments you have chosen and how they fit what you are looking to accomplish.” blah blah blah…(If only I were this smooth in real life)

So have a good story and a strong conviction about what you believe, where you think the market is going, and why doing business with you is a good idea.

When pressed for an answer on where I think the bottom of the market is (which is a question we hear a lot these days) my answer is this, “I was an Economics major in college (which I was) and as we all know, an Economist is the only profession where you can have completely opposite opinions and win a Nobel Prize for both. That said, I can find three experts to back me up on any prediction I make. Which one would you like to hear first?” It’s always good for a laugh, but it’s also honest. I have no clue.

Knock 'em dead.

Mar 6, 2009 3:34 am

Here are some initial thoughts  for you.

Before you go in, decide how you want to deal with plans.   Do you want to do small or large plans?   Do you want to have a big role or small one?   Do you prefer bundled or bolt on TPA?   Do you have an Investment Policy Statement you are comfortable with?   Do you have a Service plan idea or model (You can use the American Funds site on the advisor side (you need user name and password, but a rep can set you up in seconds), type in VPS and develop your own value prop statement.   Have a brief agenda, and have all of your questions prepared and with you. If you are unfamiliar with plans and forget a critical question on discovery, it can blow an opportunity you took months to develop.   Ask if the educational components are being met and be familiar with what it means to be 404 compliant. Read the 401k tax code if you can (snoozy, it is, mighty snoozy reading) and ask your Hartford rep for the copy of the book "To Sell or Not to Sell Retirement Plans"   It's also good advice to understand the PPA of 2006 inside and out. (another nice sleep inducing read)   Be prepared to look at the plan from the perspective of a buyer.   Don't use industry jargon.     DON'T LEAVE A DISCOVERY MEETING without: A copy of the costs for TPA and admin A copy of an investment policy statement if they have one A copy of the fund options and knowledge about the matches the employers do with the plan. (hint - If you aren't familiar with analyzing plans, Jenison Dryden can help you do the analysis if you have all that data and they might have a crack at the plan. They can be mighty helpful and seem to understand you might not be able to place the business)  MOST IMPORTANT - Set the date for the second meeting before you leave the first.   Most wholesalers can also help you with ideas, questions to ask - and if you have a good relationship with a TPA, they can provide a ton of insight into plans. Also - if you have a wholesaler you like or think you might be willing to work with on the plan, and you think they would be a good interpersonal fit for your prospect, bring them. Just give them a strong indication that they are NOT to pitch product and be prepared to take control of the meeting hard and fast if they do.   Finally, be forewarned that the sales cycle is really long on plans and if you are hunting plans with bogeys to hit, you may not last long in the business.      
Mar 9, 2009 1:56 am

I’ll second the above-I do go after plans 500M to 5MM, and they take up 2hrs of my day, as far as coldcalling.  No more-the lead time is just too long to stake the whole thing on them, but they can be really good when you do get one-they can do a lot of good for your asset base. 

Mar 9, 2009 2:34 am

Not only are they good for asset base, but if the company you are providing for is a good client base (i.e. doctors, lawyers, engineers, scientists, etc…anything well-paid, or anything with longevity, i.e. union employees - utility companies, etc.), you can spend time prospecting the employees without it even appearing that you are prospecting them.

Mar 9, 2009 2:39 am

Right now is one of the most difficult times to be cold calling K plans.  I am just now getting meetings with plans I contacted early last year.   That is the first meeting mind you which is only introductory and fact finding.  Just realize the calls you make this year most likely  get you meetings the end of this year or next year.  It is always good to have a steady stream of possible business but truthfully the profitability of plans is very tricky.  The larger the plan the less you make just like a HNW retail client.  The difference however could be that with a HNW client with a 5 milliion dollar account you might make the same as if you were charging 20 beeps on a 20million dollar plan.  The largest compensation I am aware with on a plan was around $130000 for a 200 million dollar plan where the outfit acts as a fidcuiary does all the enrollments and has billions in retirement assets. You as a single individual have almost zero chance of getting that type of plan as a newbie even if your dad were the CEO.  Anyway stick to business owners with a minimum account size of $500000 and you will be happy in the long run if you make it in the business.

Mar 16, 2009 12:10 pm

And be sure to review the company’s website prior to your appointment so that you have a deep understanding of who they are, what they do, and what sets them apart. Maybe even search for some local newsworthy item (“I say you were recognized by the National Widget Industry…”)

If they have an existing plan you could ask "If you could start over with your current 401(k) plan, what features would you keep? What would you change?"

If they don’t have an existing plan you could ask "So if you could have any bells and whistles out there, tell me about your ideal 401(k) plan."


Mar 16, 2009 3:42 pm

Most MFD vendors will give you a copy of the 5500 report so you can see some of the plans in your area and how much is in there.  Cheapest call list you’ll every get.