The Principal Financial Group recently conducted in-depth interviews with a group of financial professionals who have had success in the small business retirement plan market. The interview group also included third party administrators and veteran wholesalers of The Principal. 

Through the interviews, these experienced individuals shared their insights on best practices of financial professionals in the small plan market. We cover their best practices in depth in our white paper, "Boosting Profitability in the Small Retirement Plan Market."   

The best practices of those successful in the small retirement plan market include:

1. Keep your prospect pipeline full. To market retirement plans efficiently to small employers, it's important to keep your prospect pool full. An experienced wholesaler said, "I work with a two-person team that has sold more than 50 plans in the past five years. Most have less than $5 million dollars in assets. They have a very rigid, thorough follow-up process. They stay in front of everyone they contact until they win the business or the prospect refuses to respond. They believe a 'no' is not a 'no.' It is just a 'not right now.'"

Where can you find new prospects? Leverage centers of influence (such as CPAs, attorneys, brokers and commercial bankers), network through social and professional organizations, obtain leads from current clients and research Form 5500 data.

2. Develop a cross-sell practice. Working in the small plan 401(k) market can have a multiplier effect on profitability because of the potential for cross sales. A veteran wholesaler said, "One advisor that I work with doesn't do 401(k)s for the 401(k)s. He does the business because it is a huge opportunity to get involved in everything else. He says that for every $1 in a 401(k) plan, there are $7 more in a prospect's net worth—college funds, home equity, personal accounts and IRAs." 

As you work with small businesses, make sure you actively look for cross-selling opportunities. While prospects develop, focus on generating additional sales by helping meet the needs of current small business clients—the opportunities are significant. 

3. Marshal your resources. The retirement plan market is complex and highly regulated, so it helps to have business associates with specialized expertise. Leverage the expertise, tools and resources that are available from third parties, such as plan service providers and TPAs to enhance profitability in the small plan market.

These associates can help with design ideas, implement and provide administrative services for small business retirement plans, as well as provide tools and resources that help you support and service your small business clients. These relationships are essential to working efficiently.

Grow—and diversify—your practice with small retirement plans

The small plan market has remarkable potential for financial professionals who employ best practices and work with business associates with complementary expertise. Studies estimate that 127,000 start-up defined contribution plans will be implemented through 2016. Financial professionals who tap into this growing market—and work efficiently in it—have opportunities to build strong practices with diversified revenue streams.