Talk to advisors on the floor of any major financial advisor conference, and you will see that there are many kinds of advisor practices. Lifestyle or high-growth, niche specialty or generalist, local or location-independent, the variety is endless. And yet, most advisors have one thing in common. They chose their profession because they wanted to help clients by empowering them to make better financial decisions.
The exhibit hall of the same conference will reveal that the FinTech industry has numerous tools and automated systems to support advisors in their quest to help. Modern financial planning platforms make it easy for advisors to scale their practices and support a large number of clients.
Unfortunately, when it comes to helping companies that sponsor their own retirement plans, the 401k industry makes it difficult for advisors to help. A lack of standards, confusing terminology and limited fund choices contribute to an environment where many advisors find it is easier to just avoid servicing retirement plans.
That is a big loss for their practices, their potential clients and the industry overall. When done right and assisted by modern technology, a 401k offering can be a powerful differentiator and a strong contributor to an advisor’s bottom line.
From our years of experience helping advisors, we have learned that there is no single “right” way to manage 401k plans. Some professionals dip their toe in, while others choose to become 401k specialists.
These three case studies highlight some of the struggles advisors encounter with 401k plans and how technology can help them scale.
“Newbie Newman” is an advisor who never worked in the 401k space. Of course, he is familiar with retirement saving plans. He has a few wealth management clients who are small business owners, and a few have asked him if he could manage their 401k plans.
However, Newman is hesitant to take the first step. The complexities of the DOL Fiduciary Rule, conversion horror stories, and the intricacies of fiduciary responsibilities make it seem like adding plan sponsor clients is a lot of effort for an uncertain payoff.
How can 401k plan automation help Newman?
With a turnkey technology solution, Newman would not have to become an instant fiduciary expert. The software will take care of the most complicated parts of 401k plans. With all the necessary elements to manage a 401k plan in one place, it is easy to get organized and structure the workflows.
New plan sponsors can be onboarded in 30 minutes or less, and their employees can be enjoying the benefits of a new plan within 30 days. With technology handling the heavy lifting, Newman is free to focus on serving his clients and building new relationships.
Outcome: Newman is now a holistic advisor because he can offer 401k plan management to his business owner clients.
“Generalist Gerry” is an advisor with a handful of 401k plan clients. While he has been servicing them for a few years, there are days he wishes he didn’t have to. Figuring out the right partners was tough enough (TPAs? RKs? Corporate trustees?) but now, the ongoing effort spent to service the plans is a painful reminder of the day he chose to take them on as clients.
Somewhere between manually filling out forms, faxing hundred-page adoption agreements and dealing with call centers, Gerry realized that large record-keepers and Third-Party Administrators don’t provide the level of support he requires.
On a good month, Gerry spends between 10 and 15 hours laboring with his three plan clients. A simple request from a participant for a loan from her 401k can take an hour or longer to fulfill!
How is he supposed to grow his business if the model does not scale?
“There must be better way,” reflects Gerry as he waits on hold with the record-keeper. In the hour it takes him to get to a real person, he could have made several follow-up prospect calls!
The good news is that there is a better way. The right technology platform can bring all the key players together in one “virtual” room. There is a single point of contact for onboarding and other critical tasks. Your dedicated relationship manager is always there to answer your questions on anything from tech support to administrative details.
Modern technology solutions for 401k plan management offer true white-glove treatment for loans and rollovers. They automate filling out paperwork and guide you through the process so you won’t have to Google confusing acronyms.
Even better, participants can submit online forms to change their contributions or request loans without requiring a phone call to your office.
Outcome: Plan participants are happier since administration is simple and their needs can be addressed in a timely manner. Gerry is happy since he no longer has to deal with multiple points of contact, and his workload is dramatically reduced. Perhaps more 401k plan clients are in his future?
401k plans are a significant part of “Specialist Stephanie’s” book of business. She services 30 retirement plan sponsors, many of them large and sophisticated.
Stephanie would love to create her own model portfolios and present custom strategies for her clients. Unfortunately, some record-keepers are also fund companies, and they prefer to restrict her plans to using only their funds. Since there are so few options, there is little chance Stephanie will be able to create custom-tailored portfolios for her discerning clients.
Additionally, planning for quarterly client meetings has become a chore for Stephanie. Plan information is often difficult to locate, and many plans do not have participant-level data. Stephanie spends hours trying to dig up relevant details and explanations, and every quarter the burdensome process repeats.
Stephanie’s other problem is branding. Even though she manages client relationships and is building her brand as a 401k specialist, Third-Party Administrator and record-keeper brands are the only ones visible to her clients. Stephanie’s name and logo are nowhere to be found, so plan participants never get to know her! This will be a problem if a participant leaves to start his or her own company, since they don’t have a direct connection to Stephanie.
Finally, tracking assets under management and investments is cumbersome. Stephanie’s sponsor clients are spread across 10 different record-keepers and custodians. If she wants to manage and see her overall AUM, she must log in to each record-keeper’s platform separately, write down the AUM and enter the number into a spreadsheet.
Keeping track of over a dozen login credentials for different plans is a hassle, and the process of monitoring investments is excessively time-consuming. Since managing each plan takes so long, Stephanie has little time for plans with less than $1M. Turning away potential clients is always painful.
The good news is that a turnkey platform can be an easy solution for the smaller plans. The advisor can make up to $7,500 per plan each year with minimal upkeep time. Adding 10 plans can create an additional $75,000 in annual income with very little additional work required!
In choosing the right platform, Stephanie should look for one that offers the simplicity and convenience of a single point of contact. Vendors like Vestwell fulfill the roles of both record-keeper and Third-Party Administrator, making it easy for Stephanie to manage multiple plans. There is only one place to go to gather data on the plans and prepare for quarterly meetings.
The right platform will also allow Stephanie to build her own models and strategies. A stronger and more flexible menu of investment options, which is not limited by the interests of fund companies, is exactly what she needs!
Best of all, a modern solution will allow Stephanie to finally build her own brand as a 401k specialist. Plan sponsors and participants will log in to Stephanie’s white-labeled website. Participants that go to another company or start their own business will know Stephanie’s name and can contact her to set up their 401k plans, no matter what’s next for them.
Outcome: Stephanie can spend her time and energy on maintaining client relationships. No more chasing down forms or combing websites for performance data! Clients get personal treatment that makes Stephanie look good. After all, a modern platform like Vestwell works as an extension of Stephanie’s firm.
Winning the 401k space with modern technology
You might be curious about 401k plans, have a handful of plan sponsor clients, or run a specialty 401k practice. No matter which case study you currently associate with, the right technology can help you serve your clients better, improve your workflows and scale your practice.
The three cases we chose are just examples from a broad range of advisor practices. We know that your firm is unique. The Vestwell team is here to make it easy for you to service retirement plans, whether you are Newbie Newman, Generalist Gerry, Specialist Stephanie or someone in between!