As defined benefit plans continue to disappear, more American workers are relying on defined contribution plans, like 401(k)s, to save for retirement. And because the defined contribution market is booming, many advisors and benefits brokers who’ve never worked with retirement plans would like to break into this market. They just don’t know where to start.
“It is a complicated world,” says Phil Chisholm, vice president of defined contribution product management for Fidelity. “It’s difficult for an advisor to step in and say, ‘Today I’m going to be a 401(k) advisor.’”
Financial advisors also should build strong relationships with individuals outside of the industry as much as possible, like CPAs, insurance brokers, auditors and local chambers of commerce, he says. They also should cater to industries in which they are personally knowledgeable and focus on those types of businesses in regions where they want to do business.
Brokers who have never worked in the 401(k) market should start their journey with smaller plans or startups. Those are the “types of organizations that are going to be elementary in their needs, so advisors can build knowledge by focusing from the ground up,” Chisholm says. A novice wouldn’t even know where to begin if a $100 million plan dropped in their laps.
“Organizations like mine, because we service that small business segment, we are highly packaged. An advisor doesn’t need to do much of anything,” Howell adds.
If advisors move up market they need to be more sophisticated. The small plan market is a good place to start, he says.
There’s a multitude of training opportunities available in the marketplace to help advisors specialize in plan design, fiduciary responsibilities and employee education. Plenty of vendors can provide training on those elements, but few do all of those components, Howell says.
Prospective 401(k) advisors also need to ask themselves if they’re charging the correct fees for the services they’re offering.