“Stay away from irrelevant topics and information overload.”
Sage advice from a breakout session Friday afternoon at TD Ameritrade Institutional’s National LINC conference in Orlando titled “Excel at Retirement Plan Enrollment Meetings.”
The session, which covered what 401(k) advisors are doing wrong, as well as what they should be doing right, employed a mock enrollment meeting to make the information as realistic and timely as possible.
“It starts with recognizing that employee education and enrollment meetings are far different from the meetings that 401(k) advisors have with sponsors when selling the plan,” said Sue Ellen Lovejoy, founder and president of Lovejoy Associates, a nationwide 401(k) and 403(b) training and education company, who presented with colleague and 401k educator Bill Stamaton.
The employees today are younger, less trustful and less financially savvy than the average investor, she added.
“In order to be successful in enrollment meetings, the advisor has to view the meeting from the perspective of the employee; what is relevant to them?” Lovejoy explained. “What do they expect to get from the meeting? The want to have a voice, and not be told to save from a standpoint of shame or fear. They don’t want a lot of numbers, and want the information in small, digestible bites.”
It’s what they expect and need, but not what they get, she said, which is why the 401(k) industry is “missing the mark.” So what do they get?
“A lecture with a lot of numbers on Barron’s analysis,” Lovejoy deadpanned.
In a bit of serendipity, she was able to recruit three interns for the mock presentation from CFP college programs that routinely attend TD Ameritrade’s conference for the networking and job prospecting opportunities it affords.
“It was great because the interns answered questions posed in sample enrollment meeting slides, which matched what we believed they would say.”
The most important issue for Millennials (which is the majority of attendees currently in education and enrollment meetings) is portability, she argued, and whether or not they can take their savings with them.
“The vast majority of people have heard of vesting and have an idea of what it is, but don’t know exactly. So that’s a perfect place to start. Begin the presentation with what’s important to them in order to immediately engage them. Talk about the benefits of portability and how they choose the amount to contribute (but don’t fixate on the maximum $18,000. They can’t afford that much anyway and it will just turn them off).”
Lovejoy flashed a slide with three bullet points on the benefits of a 401(k); choice in how much they contribute, control over where it goes and portability in that it goes with them when they leave.
“Use numbers sparingly and effectively. Don’t use terms like alpha and beta, go with the basics. Ask if they know how a mutual fund works. If they don’t, ask them if they’d like just two or three points on what they do.”
She noted that advisors often believe that if they don’t use complicated numbers and jargon, they won’t be able to gauge the employee’s level of sophistication. There’s a better idea—ask them.
“Lastly, what can 401(k) advisors expect to get out of enrollment meetings?” She concluded. “Referrals, more assets under management, more wallet share from business owners and happy plan sponsors.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
The most frequent question I here from participants is “how much should I save?” Auto-enrollments have been great to get people to save something but they often don’t increase deferrals beyond the default rate of typically 3 or 4%. Whether millennials or boomers, they all agree they need to save more but how much? I suggest they set their rate much like a thermostat in their home – increase the setting until it’s too hot then dial it back. This way THEY determine what their comfort level is. Citing studies urging 18% or more could cause them to give up and not save at all. Online deferral changes are quick and easy and empowering.
Don’t ask them if they know how a mutual funds works, because they don’t and they won’t admit it. Come up with a 1 minute explanation. They also don’t know what stocks and bonds are, so tell them, also in 1 minute.