Working with 401(k) plans as a benefits broker may seem like theholy grail of benefits work, but financial advisors and agentsshould first figure out why they want to do it and what value theycan offer to plan sponsors before they begin prospecting.

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Finding a niche is important, but benefits brokers also mustunderstand that it's not an easy business to get into and thatlanding a 401(k) plan as a client isn't the hardest part.

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Many financial advisors and agents want to get involved in401(k)s because of the money and the opportunities that kind ofwork affords on the side, like personal wealth management clients.But, working with plan sponsors is “very time consuming,” explainsJames Holland, assistant compliance officer and director ofbusiness development for Millennium Investment and RetirementAdvisors in Charlotte, N.C.  

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“It might lead to individual business, but helping a plansponsor run an ERISA-compliant plan is time consuming,” he says.“There are a lot of things that have to be done for plan sponsorsbecause they are not familiar with or are not qualified to doso.”

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Find the right partner

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Holland recommends that individuals interested in approachinggroup accounts partner with others who have different strengths andwho also want to work with 401(k) plans. “You can't be a jack ofall trades and a master of none when talking ERISA,” he says. “Theretirement space is very complicated and ERISA is very complicated.You are better talking to your core competency and finding apartner who will help you in developing opportunities but, moreimportantly, [help you] protect your client relationship.”

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Stuart Robertson, president of Sharebuilder 401k, getsapproached by many benefits brokers that want to work withSharebuilder's clients.

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When working with registered investment advisors and brokerdealers, Sharebuilder wants to make sure they have a nice cleanrecord and that they “have a passion for helping people with theirretirement plans and saving their money,” Robertsonsays. 

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The company hopes that benefits brokers that want to work withSharebuilder are at least familiar with how to compare the cost andperformance of different plans and have perspective on how to makea client understand one 401(k) plan over another, he says.

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Out of the many advisors that approach Sharebuilder, “maybe 5 to7 percent are experts. Most others really want to get into this butdon't understand how complicated it is to help businesses decide onwhich plan is right for them,” Robertson says. 

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Benefits brokers who tell Sharebuilder they want to just add alittle something extra to their current business are notconsidered. “They have to be committed to it. That's important,”Robertson says.

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Working with a 401(k) plan isn't like working with an individualclient. “It is a longer sales cycle. They need to be persistent,”Holland says. “Someone is not going to make an ERISA decision aftermeeting you for five minutes. It takes being a true resource orpartner for that plan sponsor. You can't just call, have onemeeting and move on. You have to constantly show and prove yourworth because it is a complicated process.”

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Build relationships

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Holland adds that it has always been a relationship business andit takes time to develop that relationship to earn the trust ofplan sponsors.

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Differentiation is key, he says. Holland's company focuses onbeing ERISA experts. Its employees focus more on compliance thaninvestment issues.

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“Most plan sponsors don't understand the personal liability orresponsibility they took on by being part of the plan,” hesays.

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Because of the fee disclosure rules that were put in place thisyear by the U.S. Department of Labor, Holland says “now is the timeto start the conversation because there is going to be heightenedawareness and media attention to this space.”

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Robertson says that his company doesn't expect the benefitsbrokers that work with Sharebuilder 401k to be regulatory andcompliance specialists. He does want them to have a good handle onthe different cost areas, what funds are not the best funds and beable to come back after a meeting with plan sponsors and recommendsome good options for that company about how to save money orimprove plan performance.

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“The employer doesn't want to spend time with the benefit. Theywant a great plan in place that is easy for them to run,” Robertsonsays.

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Get back to basics

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Andrew Bluestone, president of Selective Benefits Group inMorristown, N.J., says that brokers and agents have rules andregulations they must follow, so before seeking out work in the401(k) space they first have to explore what their broker dealerwill allow them to present and receive compensationfor. 

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“If you are a career agent, you need to find out from yourcompany what options you have to be in this marketplace. Once youdetermine that, it will give you some direction on who or what youcan represent for prospecting,” Bluestone says. “Do your homework,see if you are qualified and know who you can represent.Prospecting is discussing opportunities in how you can help people,teach people and provide them transparency on what they arespending money on in the 401(k) world.”

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Bluestone recommends that benefits brokers who are new to thespace take along a seasoned person when speaking to new 401(k)prospects. They can help ask the right questions, provide the rightinformation and present a proper proposal.

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“That's a great way to learn,” he says.

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It's worth getting into the business because if a benefitsbroker can pick up $500,000 in investable assets in onetransaction, “it's a much better financial arrangement across theboard for the advisor.”

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The key to success in this business is to be a good educator,Bluestone says. “Understand what the goals are of the plan sponsorand what the individual goals are of the participants. “Asfinancial advisors, our purpose is to provide a backdrop orplatform for people to be able to reach their goals and not yourpersonal goals.”

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He added that benefits brokers and advisors can only besuccessful in the 401(k) business if they have more than oneclient, otherwise it isn't healthy for plan sponsors orparticipants.

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“Ten or more plans under management is much better. Then youbecome an expert at what you do and can help people in a morefruitful manner,” Bluestone says.

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