The One Thing You Must Do As a Retirement Plan Advisor

If you’re managing one or even several 401(k) retirement plans, it’s important to know what services plan sponsors really want and expect you to provide. Providing desired services obviously helps to strengthen client relationships and reduces the risk of takeover. If you’re prospecting for new business, one of the best ways to get your foot in the door is by positioning yourself as an expert in the areas that plan sponsors deem to be most important.

Of course, one of the top concerns that plan sponsors now have relates to fiduciary liability. This was highlighted by Fidelity Investments’ “2017 Plan Sponsor Attitudes” study, revealing that close to 4 in 10 plan sponsors are actively looking for new advisors due to concerns about fiduciary liability. (Why Having a Fiduciary Process In Place Is Important)

Benefits Pro Magazine reports that the study attributes the drop in satisfaction levels to solicitations from “specialty plan advisors” who are bringing awareness of DOL’s new Fiduciary Rule to the marketplace. The article goes on to state that “55 percent of plan decision makers confirmed that recent solicitations from advisors are motivating potential changes”. (Benefits Pro Magazine, 2017)

With an estimated $1.3 trillion in defined contribution assets in motion, this obviously represents a tremendous opportunity for advisors who are either already active in the 401(k) space or hoping to get into it.

There are several ways to help plan sponsors reduce fiduciary liability and satisfy other needs at the same time. A new study by OneAmerica revealed that the number one priority (as reported by 69% of plan sponsors surveyed) was employee education. The second highest priority (67%) was improving participation rates, which goes hand in hand with education—the more people know; the more likely they are to participate. “Our survey affirmed the issues that sponsors say keep them up at night”, Pat Foley, OneAmerica President of Individual Insurance and Retirement Services, said in a statement. (401k Specialist Magazine, 2018) This sentiment is echoed by the Fidelity study. Now in its 8th year, the results showed that a lack of support for employee education requirements ranked as one of the top three reasons for plan sponsor dissatisfaction.

Participant education isn’t just a legal requirement; it can provide real tangible benefits to a business’ bottom line. “With more knowledge of their financial future, employees are often relieved of financial stress, thus in the day-to-day, they can be more productive at their job.” (401k Specialist, 2017). Plan sponsors are eager to reap the rewards of a happy and secure workforce. However, when asked about the reasons for not saving into the plan, 28% of plan sponsors reported that a “lack of awareness or understanding” was the primary reason employees did not participate in their plans. (, 2017) Another advantage to providing employee education is that it helps plan sponsors to remain compliant with ERISA Section 404(c). 404(c) provides significant protection to plan fiduciaries against frivolous (but often costly) lawsuits in participant-directed retirement plans. Read about the 8 Mistakes Advisors Can Make When Approaching a Retirement Plan.

Research conducted by MassMutual illustrated that the majority of reasons sponsors changed service providers related to disappointment over a service. (2015) Employers complained about a lack of involvement with their retirement plan, passivity, not enough communication or too little interaction with employees.

It isn’t just Plan sponsors who are looking for help. “A CIGNA Retirement & Investment Services study said 89 percent of employees want their employer to make personal financial planning advice available.” Furthermore, a John Hancock Financial Services study of 401k participant behavior revealed that, “The majority of participants have a relatively low level of investment skill and understanding and are largely unprepared to manage their retirement portfolios successfully by themselves… only eight percent of participants knew that money market funds only contain short-term securities. And respondents rated their familiarity with money market funds as second only to company stock.”

In short, providing high-quality employee education can help strengthen relationships with current clients, acquire and retain new ones and develop relationships with plan participants. 401k Specialist Magazine (2017) offers 5 tips on how to run a successful employee educations meeting. Try not to overwhelm your audience with too much technical detail on financial markets. ( You’ll lose you’re their attention very quickly with this approach. You can always meet with the more detail oriented investors one-on-one. Give them a basic overview and then shift the focus onto the questions that are at the forefront of their minds, such as how contributions will affect their take-home pay, catch-up provisions… etc.

Be sure to tailor your message to meet the needs of your audience. Take into account average salary, age-range and other factors that will make your presentation more relevant to their needs. Partner with the plan sponsor; get their support and have that reflected in employee communications and in the actual meetings. Finally, have a call to action. Encourage them to fill out the necessary paperwork and make any other relevant decisions by a specified date. Retirement planning is something that people often see as something that can always be postponed till later. While there’s always plenty of room for bad decisions in the investment arena, generally the worst decision of all is the failure to start.


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