Skip navigation

The Retirement Game

Want to goose your revenues? Of course you do. But how? For an increasing number of advisors, one solution is targeting small companies' 401(k) plans. There are a host of services you can provide, anything from setting up the plan and choosing the investments to holding one-on-one counseling sessions with executives and employees. It's not for everyone, of course. For one thing, you have certain responsibilities

Want to goose your revenues? Of course you do. But how? For an increasing number of advisors, one solution is targeting small companies' 401(k) plans. There are a host of services you can provide, anything from setting up the plan and choosing the investments to holding one-on-one counseling sessions with executives and employees.

It's not for everyone, of course. For one thing, you have certain responsibilities as a fiduciary. For another, there's just a lot of work: attracting clients, meeting with employees, understanding the complexities of the market — and you may have to wait a few years to see a payoff. “I look on it as a loss leader,” says one advisor.

Still, for many practices, providing 401(k) services to small businesses has been a virtual gold mine. Here's a look at three different advisors, and how they did it.


Five years ago, Alan Meltzer surveyed his firm and saw a golden opportunity for cross-marketing. His Bethesda, Md.-based Meltzer Group was doing a steady business selling health insurance, property-and-casualty insurance and disability plans, mostly to small companies. He also had an RIA and a small division providing 401(k) plan services. (“It was like a poor stepchild,” is Meltzer's way of describing the latter).

What Meltzer realized, however, was that he had been missing out on something big: By revving up his 401(k) services, he could not only increase the amount of money he made from those plans, but also turn his business into more of a financial-services company. “We wanted to increase the amount of business we could do for a client in many related areas,” he says. “That way, we could become a one-stop shopping source for all of a client's needs.”

To do it right, Meltzer figured he needed to bring in an expert. So, he hired Andrew Prevost, a 401(k) specialist, to completely revamp that division, and target the firm's 1,200 health-insurance clients, many of whom already had 401(k) plans that had been put in place by other brokers. The revamped 401(k) business, they decided, would bear almost no relation to the previous effort. Instead of pushing a few products, they would position it solely as a consultative business, offering advice about plan structure, evaluating existing plan investments and providing employee education.

To that end, Prevost promptly put in place a 12-person department, aimed at providing the full spectrum of services. That included three managers to honcho client relationships, experts in plan design and compliance, a financial analyst to do due diligence on investments and an attorney specializing in the Employment Retirement Income Security Act (ERISA). He also spent $40,000 to get a new software system up and running. At the same time, the full-service staff served another purpose: being available to help clients whenever they needed it. “Small businesses don't have big HR departments, so they may pester you a lot with questions,” he says. “And that's fine with us. You just need to have the right staff to meet their needs.”

So far, most of the work has focused on “helping clients get the most out of plans they already had,” says Prevost. Case in point: His team recently analyzed the 16 investment choices in a 50-employee small business client's plan and found most of them to be “disasters,” according to Prevost. So, they negotiated with the plan provider to eliminate half the funds and replace them with better-performing alternatives. They lowered fees. Typically, his team will also develop an investment policy statement for each client and meet quarterly with a policy committee to review investment performance.

According to Meltzer, their efforts didn't pay off immediately. In fact, it took about three years before he started seeing a return. “We didn't get into this for quick money,” he says. “We're in it for long-term recurring revenue.” Now, the 401(k) division is doing business with 150 companies and has plan assets of $1 million to $20 million. Meltzer expects to make $1 million in net profits this year, compared to $200,000 five years ago. Total net profits have grown from $5 million to $15 million in that same time period, much of that growth due to 401(k) business.


Erik Tappin, vice president of wealth management at Smith Barney in Carlsbad, Calif., got into the 401(k) plan business by accident nine years ago. Now, 50 percent of his $200 million in assets under management comes from that work. His 401(k) business has tripled over the past five years, according to Tappin, far greater than the growth in his private client business. Not only that, but about half of his individual accounts are held by directors and officers of companies who are also using his team, called the TDD Group, to provide their 401(k) plans. “We've made a big commitment of time and resources to this business,” says Tappin, “but it's been worth the effort.”

It all started when a client, a small-business owner, approached Tappin and his partner, Rob Dobos-Bubno, asking for help setting up a 401(k) plan for his company. “That opened our eyes to the possibilities,” Tappin says. Three years later, the partners, who headed up a team with three other members, decided to take the plunge and focus on that business.

It wasn't easy at first. “There's a steep learning curve,” says Tappin. It meant immersing themselves in complicated, technical material they knew little about, from the intricacies of ERISA to the testing requirements for participation by executives. Two years ago, they both received a designation as chartered retirement plan specialists from the College of Financial Planning.

Initially, business came from cold calling. But, in short order, they also started tapping existing clients who ran their own businesses. And, other Smith Barney advisors, who lacked 401(k) expertise, began asking them for help with clients who were looking to start a retirement plan for their companies. Last year, Smith Barney gave them a designation as corporate client group directors, allowing them to work with public companies, among other things

To distinguish themselves in the market, Tappin and his partner decided to place a big emphasis on providing employee education and one-on-one services. For example, they generally meet with plan participants every quarter to go over questions. According to Tappin, that service has paid off. He points to the CFO of one client, who, after leaving the company, insisted that his new employer drop its old 401(k) plan advisor and switch over to the TDD Group. Says Tappin, “If you've done your job right, they're going to want to keep working with you no matter where they go.”


The 403(b) business has been very, very good to Algot Thorell. A partner in Lincoln Benefits Group in Jenkintown, Pa., Thorell joined the firm three years ago to help boost the firm's retirement plan business, which catered to such small nonprofits as nursing homes and opera companies. Today, that business has increased total revenues by 30 percent to 40 percent, and around $200 million in total assets are held in those plans.

Thorell's partner, James Rowley, started the firm about 20 years ago, and originally aimed at selling both insurance and 403(b) plans to individuals using tax-sheltered annuities or mutual funds. Then, about six years ago, he decided to branch out and approached his existing clients with a new pitch: hire Lincoln to help them launch a full-fledged, employer-sponsored plan with a company match for employee contributions and a more comprehensive set of services, including administration, program set up, enrollment, employee consultations and annual or twice-a-year investment review. He started adding staff and signed on with several third-party rating agencies to screen for the best funds to include in their plans.

But, after a few years, as the business started to grow, it also became clear there were other opportunities that the firm wasn't taking advantage of. For one thing, the 130 or so employers the firm worked with weren't always doing an effective job educating employees about plan benefits or encouraging them to participate. What's more, there seemed to be a potentially lucrative related business in doing extra financial-planning work for plan participants near retirement age.

That's when Rowley brought on Thorell, a former banker, as a partner. His role: rev up employee education by providing such services as more-regular forums to discuss plan benefits, and work with executives within each client company, to provide financial planning, in the process also trying to sell them 529 plans and insurance. To that end, he started working with companies to persuade them to identify employees age 55 years and older who might be interested in additional retirement-planning services. Recently, for example, Thorell met with the soon-to-retire human resources director at one client's company to discuss moving $300,000 into an individually managed account. Over the past year, he also hired four additional reps to work on financial planning. Revenues from individual employee business have increased by about 25 percent, Thorell figures. “As advisors, you're always trying to get in front of people,” he says. “We get in front of people all the time.”

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.