Bundled or Unbundled: That is the question

Bundled or Unbundled: That is the question

Employers have a choice when building their company retirement plan and choosing the service providers who will help them manage the plan.  Excluding those services provided by a Financial Advisor, the choice is either to “bundle” the plan document, plan administration, reporting and investments with one provider, or to “unbundle” those services with at least two firms who provide services in those areas.

Many employers appreciate the perceived benefit of a one stop shop, such as with a bundled provider. By virtue of adopting a bundled program, the Financial Advisor will lead the relationship and be the sole local support. In an unbundled program, or team approach, the Financial Advisor will lead the relationship, supported by a team of local specialists who work independently to design the plan, perform the annual testing required, file all government reports, and ensure the plan runs smoothly. By leaning on the compliance consultant, the Financial Advisor and employer shoulder less of the administrative burden and are not required to be experts in 401(k) plans.

Below, we’ve put together a pros & cons chart comparing bundled vs. unbundled plan providers.

 

Bundle or Unbundle

Many employers do not create an entire product or service but add to, assemble, and support products or services from other organizations. Those employers appreciate the benefits of out-sourcing, so they are comfortable with the unbundled approach. Employers are also used to working with local professionals who specialize in their area of expertise, like a CPA, lawyer or even a uniform supply firm to manage the day-to-day affairs of their business. Having separate service providers who are experts in their field, such as compliance, investments, and record keeping, adds a level of checks and balances to protect the client. This added protection is not present when the plan is bundled and only one company is responsible for all of the work.

Bundle or unbundle?  We believe that specialization of plan operations with an unbundled program can provide efficiency & lasting benefits for the company retirement plan while increasing its effectiveness to achieve the goals of the employer and their employees.

Shannon Edwards & Laina Davidson of TriStar Pension Consulting

Christopher Barlow of KnowHow 401(k)

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Let All Save

Let All Save

I believe that personal capital fuels one’s passion to accomplish their goals.  I believe all workers should have access to a payroll deduct retirement plan at their employer to use to accumulate their personal capital.  There should be as few obstacles as possible for workers to save and accumulate their personal capital.

Typically, a for-profit employer will sponsor a retirement plan only after a period of time proving that they have what it takes to stay in business.  And the first employee benefit plan they normally provide is a health plan.  Sponsoring a retirement plan could be years after.  Since 1974 all individuals have had the ability to save through an IRA.  But if we want to maximize the national savings rate, we need to encourage the implementation of workplace payroll deduct retirement plans to best promote workers accumulation of their personal capital.

Based on the Bureau of Labor Statistics’ National Compensation Survey for 2017, of the 116 million full and part-time private sector workers, only approximately 50% of them have access to a workplace retirement plan.  I believe that free markets ultimately fill any void where there is a legitimate need, even overcoming set-backs.  The States of Illinois and Oregon continue to roll-out their programs to fill the void for their citizens that are not covered by a workplace payroll deduct retirement plan.

Illinois Secure Choice

The State of Illinois requires employers with at least 25 employees, that have been in business for two or more years, and who do not currently provide a workplace retirement plan, the option to either adopt a private market retirement plan or automatically enroll their employees into the Secure Choice program. The Secure Choice pilot program began in May of 2018 and full program rollout will begin in November 2018.  An estimated 1.2 million Illinois workers will gain access to a workplace payroll deduct retirement plan through Secure Choice.

OregonSaves

All Oregon employers that do not sponsor a workplace retirement plan must facilitate the OregonSaves program covering over 1 million workers.  The program is being rolled-out in phases based on the number of employees at the company without a workplace retirement plan.  Employers with 100 or more employees began to implement the program last November and employers with less than five employees have until May 15, 2020 to enroll in the program.  The Oregon State Treasurer has filed a notice that would create an option under which any Oregon citizen, employed or not, could participate in OregonSaves.

These two state programs provide a way for all of their tax paying citizens to have access to a workplace payroll deduct retirement plan.  I believe they realize that someday many of the participants will have the personal capital to launch a new business and employ fellow citizens.

Chris Barlow

Managing Director

KnowHow 401(k), LLC

www.knowhow401k.com

cbarlow@knowhow401k.com

September 12th, 2018

TPAs & Financial Advisors are Natural Partners

TPAs & Financial Advisors are Natural Partners

Local Third Party Administration firms (TPAs) and Financial Advisors are natural partners in the employer retirement plan marketplace.  They bring complimentary skills to the partnership and a shared vision of service to their employer and employee clients.  Local TPAs and Financial Advisors:

  • Are passionate professionals who together enhance the probability of their clients achieving their goals.
  • Can have deep roots in their community through their family, friends, and organizations they’re involved with.
  • Have their ear to the ground when it comes to the needs of their community.

 

The ability of the local TPA and Financial Advisor to personally meet with plan sponsors is a win-win-win for all.  The rise of digital communications makes business interactions easier and faster than ever, however many business owners still prefer face-to-face meetings.

 

Local employers, especially those with 100 and fewer employees, are used to working with local professionals, (Attorneys, CPAs, PC Agents, Commercial Lenders) to help them run their business.  Those employers appreciate the benefits of delegating. For newer Financial Advisors, a local TPA’s connections to business owners, CPAs and others can offer them a step up as they begin building their business.

 

Many TPAs rely upon Financial Advisors and other sources for new business referrals.  When prospecting for new business, TPAs and Financial Advisors offer educational workshops for owners and key executives about the importance of employer retirement plans. TPAs also offer workshops specifically for Financial Advisor education, covering a wide variety of topics, from 401(k) plan sales and design, to regulation updates.

TPAs report a far higher close ratio with Financial Advisors when the TPA is present at the sales presentation.  And both have a vested interest in serving the employer and their employees in order to retain the relationship and assist the employer in maintaining a thriving retirement plan.  The service they deliver together produces good results for their community.

 

It all adds up that local TPAs and Financial Advisors are natural partners!

 

By: Laina Davidson, Shannon Edwards, TriStar Pension Consulting

Christopher Barlow, KnowHow 401(k)

THE PROSPECTING FLOW: The Discovery Meeting

THE PROSPECTING FLOW: The Discovery Meeting

#4 Profiling

Past articles in the Prospecting Flow series discussed starting the conversation with a 401(k) prospect plan decision maker, posing your initial questions to confirm the research you have on the plan, managing their objections and obtaining their opinion on improvements for the company 401(k) plan.  You are now able to decide whether to move forward with them and set up the Discovery Meeting.

The purpose of the Discovery Meeting is to continue the process of understanding what you need to know about the company, the employees, and the 401(k) plan to enhance the probability of being selected to serve.  Your objectives to accomplish during the Discovery Meeting include:

  • Show your value-added service with your Positioning Presentation.
  • Ask questions and solicit quality responses to fully understand the decision maker’s goals for their plan.
  • Develop a thorough understanding of the hurdles and or objections that you will have to overcome during the upcoming sales presentation.
  • Answer any questions the decision maker asks about you and the services you can provide.
  • Schedule a follow up meeting to present your recommendation, a sales presentation if appropriate.

Conduct the Discovery Meeting at the employer’s location.  By being on location you will be better positioned to gather other information besides the answers to your questions. You can review their office walls for family pictures, diplomas and awards.  You will certainly gain a clearer understanding of them and their company by visiting them.

There are four categories of Discovery Meeting questions to get answered.

  • Plan Demographics
  • Plan Operations
  • Plan Investments
  • Plan Service

I encourage you to end with plan service questions because service is what you have most control over.  By asking the Discovery Meeting questions you will learn about problem areas and features other Advisors may have spoken to them about that they are interested in.

Final questions posed can include a trial close.  You want an understanding if the prospect plan decision makers will move forward if they are presented with a better option.  You are not in the proposal publishing business.  Here is a sample trail close question, “You have provided a great deal of information, with plenty of opportunity for me to suggest improvements when we meet next. If after our next meeting you agree that my recommendations will provide the 401(k) plan that works better than your current plan will you be at a point where you are ready to make the upgrade?”

And a final question to ask as you conclude the Discovery Meeting seeks their assistance setting up the agenda for the next meeting when you will present your recommendations.  Ask, “Prioritize for me what will be important to discuss at our next meeting when I present our recommendations.  And if necessary, “Would all other decision makers agree on that prioritization?”

As you close the Discovery Meeting ask for a copy of their 408(b)(2) Fee Disclosure Form and an Enrollment Kit which includes a Summary Plan Description and investment overview.  A thorough Discovery Meeting enhances the probability of serving the plan.  Look for the next article in the series, when I’ll review the Sales Presentation Flow.

Continued success.

Christopher Barlow

Managing Director

KnowHow 401(k), LLC

www.knowhow401k.com

June 2018

THE PROSPECTING FLOW: Initial Profiling Questions and Objection Handling

THE PROSPECTING FLOW: Initial Profiling Questions and Objection Handling

#3_Prospecting__Cold_Calling (2)

In my previous article I discussed using your “why you” words when you start the conversation with a prospect plan decision maker about their company 401(k).  Then ask one opening question to get the conversation going.  If they are still chatting with you, your next step is to ask a few initial profiling questions.  Answers to the questions gives you insight to move forward with the prospect plan decision makers and if appropriate, arrange the discovery meeting.

The few initial profiling questions are used to verify what you know about the plan through your initial research and to obtain decision makers perceptions of their company retirement plan.  The research you have on the prospect plan is like a poker hand.  In poker you verify how good or bad your cards are by interacting with the other players.

One of your initial profiling questions and perhaps the most important is one that uncovers any relationship the decision maker may have with any of the current plan providers including the current Advisor.  Ask, “Are there any circumstances or relationships that could cause you to favor one institution or individual over another?”  You can compete against anyone.  You just want to know the levelness of the playing field.  And the prospect plan decision maker appreciates your courage in asking about possible relationships.

Be ready to manage objections as soon as you deliver your opener.  I’ve collected twenty classic objections delivered by prospect plan decision makers heard over several decades.  From the above diagram you can see the flow of managing a prospect objection.  First, relax knowing the prospect isn’t rejecting you or your possible solutions; they are rejecting being interrupted.  Acknowledge their issue with a simple, “I understand.” And if necessary, ask them a question to clarify their issue and respond.  If the prospect plan decision maker states, “Our plan is working fine.”  You might reply, “Fine is on the way towards great.  I can’t make your plan great overnight, but I can work towards it over time.  What do you want to see improved with your company 401(k) plan?”

The next article in the series will review the discovery meeting where you strengthen the relationship with the prospect plan decision maker and learn all you need to know to be chosen to serve their company 401(k) plan.

 

Christopher Barlow

Managing Director

KnowHow 401(k), LLC

www.knowhow401k.com

May 2018

 

THE PROSPECTING FLOW: Starting the Conversation with Prospect 401(k) Plan Decision Makers

THE PROSPECTING FLOW: Starting the Conversation with Prospect 401(k) Plan Decision Makers#3_Prospecting__Cold_Calling (2)

The diagram above shows the evolving steps of a cold call to a prospect plan decision maker from the initial contact to setting up the Discovery Meeting.  No matter if your activity is cold calling, dropping-by or social networking there is the moment when you start the conversation with your prospect plan decision maker about their company 401(k).  I call them the “why you” words.

Why should they take your call and if they do, why should they listen to you?  Why are you different than every other Advisor that calls and why are you different than their current Advisor?  Your prospect plan decision maker must have an initial level of trust before they can respect you and begin a quality conversation.  Your opener is a sentence or two of meaningful words that can cause a trust-based relationship to begin with your prospect plan decision maker.  I suggest you build your opener from your value statement.

Your value statement should contain those one or two sentences that can cause the prospect plan decision maker to want to hear more about what you do.  “My name is          from     .  My team works with companies like yours that believe their 401(k) is too important for they and their employees to manage on their own.  I am hoping to have a conversation with you about how we work to assist you in accomplishing the goals you have for the company 401(k) plan.  Is it possible that we can have that conversation?”

With your opener delivered, the pump is primed.  To keep the conversation flowing you ask them one opening question.  What’s your favorite?   Mine is, “What goals do you want to accomplish with your company 401(k) plan?”  It’s my favorite because when you are chosen to serve you will be part of their answer to the question.

Your next step is to ask the initial profiling questions to verify what you found out about the plan through research, plus any other information that allows you to determine if you want to take your time to go out and conduct the discovery meeting with the prospect plan decision maker.  The next article in the series will review the initial profiling questions you pose to prospect plan decision makers and managing their objections.

Christopher Barlow

Managing Director

KnowHow 401(k), LLC

www.knowhow401k.com

May 2018

 

 

No-Advisor 401(k) Programs

No Advisor

No-Advisor 401(k) Programs

I know there are employers that believe Advisors can’t add any value to their company 401(k) plan.  The no-Advisor 401(k) programs provide them everything they need, except an Advisor, at the lowest cost possible.  A chase to the bottom.  Employers and employees will never physically have anyone working with them to maximize this very important employee benefit program.  The no-Advisor providers boast about being the best 401(k) program for “small employers”.  Employers with fewer than 100 employees rely on local professionals to assist them to run their business, including CPAs, Attorneys, Bankers, Group Benefit Agents and suppliers to name a few.  And the employer can look in their eyes when speaking with them, possibly the same person over the long term.

I believe disgruntled employers have never worked with an effective Advisor to serve their 401(k) plan.  Effective Advisors are the one’s when asked, what’s your favorite part of serving 401(k) plans answer, “Working with employers and their employees to accomplish their goals.”  I believe effective Advisors can enhance the probability of a company’s profitability by working with employees to use the 401(k) plan to confidently prepare for their retirement.  The retirement readiness of employees promotes the long term viability of a company by facilitating the replacement of their workforce with younger, better skilled and less expensive employees.

All 40(k) plans should have an effective Advisor working with the employer and employees.  A Chief Retirement Officer to assist the employer to define plan goals, activities to accomplish those goals, monitoring outcomes and reporting back for next steps.  And a retirement coach for the employees who will work with them to confidently use the 401(k) to be ready to retire when they choose.

February 19th, 2018

Crossing The Line

Crossing The Line

We all know what the line is, the separation between lawful ethical and unlawful unethical actions.  No matter if the act is personal or professional we all know when we approach the line.  An unlawful unethical retirement plan industry professional negatively impacts the plan participants, their beneficiaries, plan sponsors and their employer.

The individual in our industry that commits an unlawful unethical act is always caught and pays a far greater price than the amount of money they absconded.  Where they may be held to repay the money, the value of their reputation will never recover.

Through all of my personal experiences and witnessing other’s decision as they approach the line, it’s apparent that if one catches themselves and doesn’t cross the line, or if they do and through the torment of their conscious or imprisonment they realize it isn’t worth the cost, they are better able to step back from the line in the future.

February 2nd, 2018

40 Years and 11 Days

40 Years and 11 Days

The 40th anniversary of the Revenue Act of 1978 is nearing. The act added Internal Revenue Code Sec. 401(k).  Forty years from obscure code to $6 Trillion.  The reports are that early backers of the code created it as a way individuals could supplement their retirement income from a defined benefit plan.  They never intended 401(k) plans to become the primary retirement wealth accumulation vehicle it has become for about 50% of tax paying Americans.  It was 1981 before the first plan was submitted for approval.  I encourage you to read, The Day I Designed The First 401(k) Savings Plan, by Ted Benna.  http://401kbenna.com/401k-history.html.

Congress has tried to repeal or alter IRC 401(k) several times over the years when it realized the growing amount of taxes that would not be collected. Over eleven days in October this year IRC 401(k) went from budget bargaining chip to a non-negotiable topic.

Tankersley, Jim. “Republicans Consider Sharp Cut in 401(k) Contribution Limits.” NY Times, October 20, 2017

Weiss, Miles. “Here’s How Money Managers Plan To Battle 401(k) Cuts in Trump’s Tax Plan.” Bloomberg, October 22, 2017

Bryan, Bob. “Trump says ‘there will be NO change to your 401(k)’ after reports Republicans want new caps on retirement savings.” Business Insider, October 23rd, 2017

Lenzner, Robert. “Slashing Pre-Tax 401(k) Contributions Would Be A Big Middle Class Double Cross.” Forbes, October 30th, 2017

Bolden-Barrett, Valerie. “Update: GOP tax plan released, no cuts to 401k contributions.” HRDIVE, October 31st, 2017

There may be changes in the amount of pre-tax contributions and a major re-construction of the American Retirement Savings System in the future. If you are a financial sales professional currently serving or considering to serve the 401(k) marketplace you should have comfort knowing your career is on solid ground based on the duration, ferocity and quickness to protect the current 401(k) structure.  Time is on your side.

December 1st, 2017

Happy Anniversary!

Happy Anniversary!

What were you doing 30 years ago today, October 19th, 1987?  I was in my fifth year as an Account Executive at Merrill Lynch in Dayton.  We had been told for months by the firms’ chief technical strategist, Robert Farrell that there could be a major downward move in the stock market.  I learned that tree’s don’t grow to the sky thirty years ago today.

The most memorable moments of the 19th and for the next few days was speaking with individual clients.  They were interested in their account values, but they wanted to make sure I was doing OK.  They knew that in addition to managing the emotion of the market, I was getting married in five days.

Thirty years after the biggest one day percentage drop in stock market history, the US economy has withstood incredible highs and lows as today the DJIA is 10x the value it was at the close of the market on October 19th, 1987.  Similar to marriage you have to have long term belief and commitment.  Happy Anniversary to my wife.

Continued Success.

Chris Barlow

Managing Director

KnowHow 401(k)

Founded in 2000, KnowHow 401(k)’s purpose is to increase the number of effective Advisors that serve the 401(k) marketplace.

October 19th, 2017