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

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

Many financial advisors and agents want to get involved in 401(k)s because of the money and the opportunities that kind of work affords on the side, like personal wealth management clients. But, working with plan sponsors is “very time consuming,” explains James Holland, assistant compliance officer and director of business development for Millennium Investment and Retirement Advisors in Charlotte, N.C.

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

Find the right partner

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

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

When working with registered investment advisors and broker dealers, Sharebuilder wants to make sure they have a nice clean record and that they “have a passion for helping people with their retirement plans and saving their money,” Robertson says.

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

Out of the many advisors that approach Sharebuilder, “maybe 5 to 7 percent are experts. Most others really want to get into this but don't understand how complicated it is to help businesses decide on which plan is right for them,” Robertson says.

Benefits brokers who tell Sharebuilder they want to just add a little something extra to their current business are not considered. “They have to be committed to it. That's important,” Robertson says.

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

Build relationships

Holland adds that it has always been a relationship business and it takes time to develop that relationship to earn the trust of plan sponsors.

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

“Most plan sponsors don't understand the personal liability or responsibility they took on by being part of the plan,” he says.

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

Robertson says that his company doesn't expect the benefits brokers that work with Sharebuilder 401k to be regulatory and compliance specialists. He does want them to have a good handle on the different cost areas, what funds are not the best funds and be able to come back after a meeting with plan sponsors and recommend some good options for that company about how to save money or improve plan performance.

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

Get back to basics

Andrew Bluestone, president of Selective Benefits Group in Morristown, N.J., says that brokers and agents have rules and regulations they must follow, so before seeking out work in the 401(k) space they first have to explore what their broker dealer will allow them to present and receive compensation for.

“If you are a career agent, you need to find out from your company what options you have to be in this marketplace. Once you determine that, it will give you some direction on who or what you can 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 are spending money on in the 401(k) world.”

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

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

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

The key to success in this business is to be a good educator, Bluestone says. “Understand what the goals are of the plan sponsor and what the individual goals are of the participants. “As financial advisors, our purpose is to provide a backdrop or platform for people to be able to reach their goals and not your personal goals.”

He added that benefits brokers and advisors can only be successful in the 401(k) business if they have more than one client, otherwise it isn't healthy for plan sponsors or participants.

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

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A beginner's guide to working with 401(k) plans

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