How to Successfully (and Profitably) Service Small 401ks—2018 Excel 401(k): The Advisors’ Conference
Many 401k advisors steer clear of the small plan space, meaning those with under $10 million in assets.
Kurt Wedewer thinks that’s a mistake—especially since the vast majority of plans fall into this category.
It’s a misconception that you can’t make money inside of a small 401k, the senior executive vice president of ATRetirement told attendees Monday at Excel 401(k): The Advisors’ Conference. This year’s event, hosted by Rekon Intelligence, took place at Caesars Palace in Las Vegas.
“The market has moved in the direction of being more fee-effective, and the service level and individual options for the small plan participant and plan sponsor have suffered,” he explained. “And while I would agree that as a standalone piece of business, a small 401k plan relative to the time spent is not efficient, when you gather information on their entire financial picture…the 401k typically becomes a very profitable piece of business.”
The key is to take a holistic approach. By applying a service model that involves creating a complete financial plan for participants—incorporating components above and beyond retirement like wealth management, brokerage and insurance—advisors can both properly serve these plans and still be profitable in their own business.
It might sound like a challenging concept to sell to sponsors and participants; however, Wedewer assured advisors it’s not.
“For over 80 percent of individuals, their 401k is their largest asset outside of their home,” he said. “Therefore, when you have their 401k, even if it’s a small plan, you will have hold of their biggest asset, which means they will sit down with you.”
He references a metric used within his firm wherein a 401k advisor should earn $8 outside of the 401k plan for every dollar he earns inside of the 401k plan.
Using this model, “we have seen advisors become very successful in the small plan space,” he concluded.
Jessica Claeys is an editor, writer, and graphic designer, who has been creating both print and digital marketing and communications content for 10+ years.
Jessa Claeys is a licensed insurance producer in the state of Colorado and an insurance editor for Bankrate. She currently covers auto, home and life insurance with the goal of helping others secure a healthy financial future. Jessa has over a decade of experience writing, editing and leading teams of content creators. Her work has been published by several insurance, personal finance and investment-focused publications, including BiggerPockets, 401(k) Specialist, BP Wealth and more.
