You can have your cake and eat it too, if the cake is a small 401(k) plan and you’re an advisor.
“Small Plans, Big Margins. You Can Have Both” was the title of a packed Thursday morning panel discussion at Excel 401(k): The Adviors’ Conference in Las Vegas Tuesday morning.
Moderated by Jessica Searcy-Maldonado of Searcy Financial Services, it featured Matthew Siel, vice president of business development with Greenleaf Trust and Melanie Dickinson, an investment advisor with PMD Advisory.
Dickinson began by explaining the importance of knowing the plan’s numbers, and looking at them from a number of different angels, including:
REM = Revenue under management
DUM = Distributions under management
PUM = Participants under management
FUM = Flows/contributions under management
“You should chart them quarterly as well as year over year,” she explained. “You should also know each plan’s stats, including its payroll dates, assets in the plan, the advisor’s compensation (is it equal to time spent on the plan), plan flows, documents, and the firm’s advisors that are assigned to service the plan. You can then confidently say, ‘You hired me, Mr. CEO, and this is all that I’ve done for you.'”
Little surprise, Dickinson noted that advisors seeking success in the small plan market (define by the panel as below $5 million) must have an organized process and traceable workflow.
“You’re preparing your participants for 20 years of days off,” she said.
Siel described Greenleaf’s typical plan size as $2.5 million in assets with 80 participants, for which the firm charges 50 basis points. Another five basis points are added for 3(38) services.
“A survey recently found that retirement plans are the No. 1 hardest product to sell,” he claimed. “It affects the financial future of every participant, so it is absolutely not taken lightly. So why even go after small plan market, he rhetorically asked? After all, it typically means lower revenue, and smaller plans are often higher maintenance.”
“You must set expectations, like you’ll meet with employees two times per year rather than every month,” he said. “Does the business have multiple locations? The cost of travel must therefore be included and budgeted for and built into service model. However, smaller plants are stickier. Once you gain that trust and establish the relationship, they’ll stick with you through thick or thin, and are incredibly loyalty.”