401k and retirement plans?

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Stockguy2011's picture
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Joined: 2011-03-28

I know these boards are primarily filled with private client brokers and advisors, but does anyone have advice on entering the small-mid 401k markets ($3-10mm)?  Worth the time and energy?  Best marketing ideas?

Who do you know's picture
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Joined: 2010-12-08

I have done a little bit.  I am taking over a small plan ($1.5 mm) this summer.  The only reason why I got it is because the owner was my client.   It's extremely tough to prospect 401k plans, almost all have a gatekeeper and it's almost impossibe to get pass these cranky old hags.  So it makes it tough cold calling and doorknocking.  If you are are newer, I wouldn't spend a heck of a lot of time prospecting for them.  I try to spend 1-2 hours a week on it. 

Stockguy2011's picture
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Joined: 2011-03-28

Who do you know wrote:I have done a little bit.  I am taking over a small plan ($1.5 mm) this summer.  The only reason why I got it is because the owner was my client.   It's extremely tough to prospect 401k plans, almost all have a gatekeeper and it's almost impossibe to get pass these cranky old hags.  So it makes it tough cold calling and doorknocking.  If you are are newer, I wouldn't spend a heck of a lot of time prospecting for them.  I try to spend 1-2 hours a week on it.  Agreed on both accounts.  With that said, I have the time and hard-headedness to prospect mid-size plans.  I talked with a mid-tier advisor who landed one, 200-300 client plan and built his entire career off the drippings from the 1 plan.  I have much bigger goals than that, was thinking more like 8-10 nice plans to make a career out of it.   I may be completely off base and unrealistic there though.  That is why I am asking.  Thanks.

Who do you know's picture
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Joined: 2010-12-08

No doubt landing a big plan can set you up big time.  I just think it can take years to land one and that's after you get your foot in the door.  The one I just got, I had my first appointment on over a year ago, and just now confirmed 2 weeks ago he was going to go with my plan.  It won't be until October until I can sit down with the employees and start collecting trails.  This takes time, it's not something you can start prospecting for today and expect to start rolling in new plans.  My guess is for plans in the range you are talking about expect zero results in the first 6 months and if you're lucky you might get something within a year.  So if you are new, you will starve yourself out of the business if this is your only objective in growing your business.  What's your pitch/plan?

j20a00g's picture
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Joined: 2011-01-05

i'd suggest getting to know a good TPA (third party administrator) or possibly a great wholesaler that may be able to throw you a bone or 2 to get started. another great start is ask the people that you use. your doctor would be a great start!with that being said, there is a team in my office that started about 6 years ago with 2 plans that were given to them by a TPA after a bunch of schmoozing. they now manage about 70 plans. it is quite easy to get on as agent of record on a plan (and get the 50bps or so trail). just call businesses and ask when the last time their rep has contacted them. also, ask to give them a plan review which is suggested by the department of labor to be done atleast every 2 years. remind them that it is their fiduciary responsibility to ensure that their plan remains competitive in terms of fees and options.  

Stockguy2011's picture
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Joined: 2011-03-28

j20a00g wrote:i'd suggest getting to know a good TPA (third party administrator) or possibly a great wholesaler that may be able to throw you a bone or 2 to get started. another great start is ask the people that you use. your doctor would be a great start!with that being said, there is a team in my office that started about 6 years ago with 2 plans that were given to them by a TPA after a bunch of schmoozing. they now manage about 70 plans. it is quite easy to get on as agent of record on a plan (and get the 50bps or so trail). just call businesses and ask when the last time their rep has contacted them. also, ask to give them a plan review which is suggested by the department of labor to be done atleast every 2 years. remind them that it is their fiduciary responsibility to ensure that their plan remains competitive in terms of fees and options.   The pitch/plan:  Similar to what J20 said.  I have a number of solid relationships with business owners and centers of influence throughout my area (500 K people).  These relationships were built in the first 12-15 months of my career over a lunch or cup of coffee (I am 18 mo in now).  I kept most appts. very light on investment talk and tried to build a solid, trustworthy, and non-pushy repoire.  Dripped monthly/quarterly with a newsletter/article.  My plan now is to "capitalize" on the relationships with a point of pain retirement plan call.  How long has it been since you last saw your plan consultant (keeping in mind that I've contacted you monthly for the last 6-12 months)?  How long has it been since you reviewed your investment plan options and are they still revelant?  What are the "all-in" costs per participant for your plan?  Do you have a plan investment policy statement?There will also be a fair amount of cold calling CFO's, decision makers etc. to ask the same questions.  This may be started with an introductory letter.My thought is that there is enough shakeup and new regulations in this industry that it may be an opportune time to ruffle feathers....

Takingnames's picture
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Joined: 2007-11-09

Plan business is good business, but you have to be prepared for a long sales cycle and be ready to close a much lower percentage than with retail business.  You have to understand all the elements, fiduciary responsibilities, fees, performance and you have to be able to clearly articulate the value proposition you bring. Know the regulations, know the issues surrounding plans (Plan Sponser Mag is a good read) - so is the DOL site. Get familiar with it.  I had a prospect pull out prints from the DOL web site at a recent closing meeting and ask questions - so I reached into my briefcase and pulled out my bound and tabbed copies of what I'd printed and went over the questions point by point.  I just knew that was the type of person she was.   You also have to be empathetic to the business owner.  You need to know their pain and understand their issues. Sometimes they have nothing to do with the plan - but you need to know them to show value.   You have to know the strengths and weaknesses of platforms.  Don't rely on the wholesaler who comes in and songs and dances you with lunch.  They all want your business but they don't all KNOW the business. They ALL have pieces about the new regs, but you have to articulate why it matters.  Find the ones who have been advisors themselves if you can.  If you are not sure if they know their stuff, contact their internal and get to know the internal really well.  A good looking external can help you close a deal even if they don't know anything as long as YOU know what you need and you may have to rely on their internal to get it.  If you can do open architecture, be prepared to show the value of that.  If your prospect wants guarantees, be ready to be happy showing an annuity product but be aware that may have an IGOTCHA forcing participants to roll to that plan companies IRA instead of out to an advisory firm (keeps assets sticky to the plan provider and keeps those assets from rolling into your book over time). DO NOT throw the competition under a bus.  You are dancing against 2 or maybe 3 of your competition. They aren't in the room  - but the business owner, board of directors or HR Director is talkign with them and looking at it.   Don't make representations about another product weakness unless you can back it up.  Prospects will take that information, pin your competition with it and your competition will be able to show you where you did not understand your product and "voila" they have planted doubt about you and your knowledge into your prospects head.   You have to know the competative advantages and disadvantages of your competition in platforms, service and other areas. You should be able to pull apart a 5500 and look for weaknesses there.    If you are just trying to get into plan business; be prepared to throw away opportunities before you are really ready to pitch.  Go and talk to several 100k plans that you may not want. Think of them as practice. If you win them - great, You have a plan that may grow with you.. If you don't get them, then what did you lose? An opportunity to manage 100k at 50bps tossed against a grid. Boo Hoo. There is downside to plans also - it's not all gravy - and the bigs ones do walk and get wooed all the time.     You need to define what is good business for you.  A plan with 2 mil in assets sound great, right? As a broker of record, assets may not reflect through your firm and you may only get production credits. If you plan your bonus on assets coming in on a BOR you'll be sorry.  Production on a plan like that  at 50bps and against a grid that may be almost peanuts for a plan that has 200 employees with tiny accounts that you don't want to roll off the plan. You might have to do enrollment meetings at different sites, or meet one to one with Sally, Jimmy and Lucy all who have 2 k before meeting with Jack - the partner.  You finally meet iwth Jack and it's great. He's the who has 500k in the plan and you can just SENSE that he has more elsewhere. What you do not know is that he has a buddy at the golf club or a CPA who does investments. (Hint - not great)  At the meeting, Jack asks you how he can do an inservice non hardship withdrawal and you tell him because you are so excited to get those 500k out of the plan and into an account you manage. Sounds GREAT right? It is great. He does the inservice and he does it and rolls those assets off the plan to the buddy. It happens all the time.   A plan with 6 mill in assets and 15 employees might be terrific. Until you find out that the plan has an annuity product that will damage them if assets move.   Bottom line advice is to know what you are going into BEFORE you get into it and be prepared for all sorts of things you never expected.    

Stockguy2011's picture
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Joined: 2011-03-28

Takingnames wrote:Plan business is good business, but you have to be prepared for a long sales cycle and be ready to close a much lower percentage than with retail business.  You have to understand all the elements, fiduciary responsibilities, fees, performance and you have to be able to clearly articulate the value proposition you bring. Know the regulations, know the issues surrounding plans (Plan Sponser Mag is a good read) - so is the DOL site. Get familiar with it.  I had a prospect pull out prints from the DOL web site at a recent closing meeting and ask questions - so I reached into my briefcase and pulled out my bound and tabbed copies of what I'd printed and went over the questions point by point.  I just knew that was the type of person she was.   You also have to be empathetic to the business owner.  You need to know their pain and understand their issues. Sometimes they have nothing to do with the plan - but you need to know them to show value.   You have to know the strengths and weaknesses of platforms.  Don't rely on the wholesaler who comes in and songs and dances you with lunch.  They all want your business but they don't all KNOW the business. They ALL have pieces about the new regs, but you have to articulate why it matters.  Find the ones who have been advisors themselves if you can.  If you are not sure if they know their stuff, contact their internal and get to know the internal really well.  A good looking external can help you close a deal even if they don't know anything as long as YOU know what you need and you may have to rely on their internal to get it.  If you can do open architecture, be prepared to show the value of that.  If your prospect wants guarantees, be ready to be happy showing an annuity product but be aware that may have an IGOTCHA forcing participants to roll to that plan companies IRA instead of out to an advisory firm (keeps assets sticky to the plan provider and keeps those assets from rolling into your book over time). DO NOT throw the competition under a bus.  You are dancing against 2 or maybe 3 of your competition. They aren't in the room  - but the business owner, board of directors or HR Director is talkign with them and looking at it.   Don't make representations about another product weakness unless you can back it up.  Prospects will take that information, pin your competition with it and your competition will be able to show you where you did not understand your product and "voila" they have planted doubt about you and your knowledge into your prospects head.   You have to know the competative advantages and disadvantages of your competition in platforms, service and other areas. You should be able to pull apart a 5500 and look for weaknesses there.    If you are just trying to get into plan business; be prepared to throw away opportunities before you are really ready to pitch.  Go and talk to several 100k plans that you may not want. Think of them as practice. If you win them - great, You have a plan that may grow with you.. If you don't get them, then what did you lose? An opportunity to manage 100k at 50bps tossed against a grid. Boo Hoo. There is downside to plans also - it's not all gravy - and the bigs ones do walk and get wooed all the time.     You need to define what is good business for you.  A plan with 2 mil in assets sound great, right? As a broker of record, assets may not reflect through your firm and you may only get production credits. If you plan your bonus on assets coming in on a BOR you'll be sorry.  Production on a plan like that  at 50bps and against a grid that may be almost peanuts for a plan that has 200 employees with tiny accounts that you don't want to roll off the plan. You might have to do enrollment meetings at different sites, or meet one to one with Sally, Jimmy and Lucy all who have 2 k before meeting with Jack - the partner.  You finally meet iwth Jack and it's great. He's the who has 500k in the plan and you can just SENSE that he has more elsewhere. What you do not know is that he has a buddy at the golf club or a CPA who does investments. (Hint - not great)  At the meeting, Jack asks you how he can do an inservice non hardship withdrawal and you tell him because you are so excited to get those 500k out of the plan and into an account you manage. Sounds GREAT right? It is great. He does the inservice and he does it and rolls those assets off the plan to the buddy. It happens all the time.   A plan with 6 mill in assets and 15 employees might be terrific. Until you find out that the plan has an annuity product that will damage them if assets move.   Bottom line advice is to know what you are going into BEFORE you get into it and be prepared for all sorts of things you never expected.     Thank you.  Very thought provoking.  You make some very good points, especially about the owners/CPA/brother-in-law story.  Be tough to stomach when the ultimate goal of the 401k is to get the owner/executives as private clients and find out that door is bolted shut with a familial relationship.  I guess that situation favors the Muni bond cold call to flush that information out early. Seems to be very popular approach.  Muni's are somewhat difficult to get your hands in my state, very limited inventories. I appreciate the comments. I work at a firm that has provided a nice base and plenty of time to explore whatever avenues I think are best to build a long term business (Rare).  Still trying to find a true direction.  I still have to produce, but they look at my total numbers (AUM, production) after 3 years and make a decision on my future then.  Hope to be at $25 mm,  225k+ gross after yr 3. 

Takingnames's picture
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Joined: 2007-11-09

If you can flush it out. Sometimes the plan admin or decision maker doesn't allow you to get to the 500k guy you know is there; and you can't get in front of him until you are in front of him.  That's the bear with these plans if you want to pull assets off. Another "thing" that I've seen happen (not to me, but I won business away from an advisor who didn't explain something to the plan sponser - is that the plan moves and the big asset holder or holders don't like it, or were ready to go and they move off the plan.  The costs can go up and go up hard. The plan sponsor gets pissed because the advisor didn't disclose and boom. Can you say Broker of Record change? Cold calling does work to get into plans. Keep the pressure constant. Eventually the door opens.  

Stockguy2011's picture
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Joined: 2011-03-28

I am in the middle stages of learning the pro's and con's of my competition.  Anyone, who knows the plan business knows that Fidelity is a big player, especially in the larger plans.  That has been the toughest one to crack for me.   Has anyone had success selling against their plans?  What are the "points of pain" if you will?

Who do you know's picture
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Joined: 2010-12-08

It's pretty tough to beat them on cost.  That leaves you with two other avenues.  Service and investment performance.Service: Fidelity doesn't provide much for employee education.  Even though they might promise it in the early stages.Investments performance: If it's Fidelity platform only, it's pretty easy to beat their fund performance.  Their target date funds don't stack up to well either.  If you get a copy of the enrollment kit, and you work with a good product partner, they should be able to compare your proposed funds vs Fidelity's side by side. 

Moses's picture
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Joined: 2011-04-10

I'm five years in and just now getting into this space.  Could not imagine being a newer rep. and going after these types of plans.  The sales cycle is just too long.

Vensik's picture
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Joined: 2010-01-29

You might try searching in your area for plans you are already set up to administer and simply try to get the Change Broker Dealer form signed.  All the above is still true, but it can be an easier sell if the business owner does not have to change anything and all you are competing on is a level of service.I have a small industrial park near my office with about 300 businesses in it, about 10 years ago another firm went in and set up ALOT of business plans.  I got an appointment with one of the businesses admins through a client of mine that works there, she was very excited to see me.  Apparently she has called the broker dealer on the account twice last year for questions with no response and was excited to hear I was right down the street and willing to come do some seminars.  A week later I had taken over the 1.5m American funds SIMPLE and was transfering some of the business owners outside assets as well.  Once I knew there was no service on the other plans in the business park, it was simple to go in and offer some personal service and nothing about the plan needs to change.  Its worked for me on 2 other plans now.  1 signature and 30 new clients can be worth it, atleast 1/3 of them have old 401k's.

alexus's picture
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Joined: 2011-03-24

There is downside to plans also - it's not all gravy - and the bigs ones do walk and get wooed all the time.

rockywillson1892's picture
Joined: 2012-03-02

I need advice on saving money for my retirement. I am earning 1000$ per month plus incentive, my expenses mostly come in the range or 500-700$ per month. Now I want to save money for my future use please suggest me ways how to save money cause this is the first time when I am thinking of saving money.
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