Here’s what you need to know when adding a 401(k) to your portfolio

Register now

If you don’t have a 401(k) plan offering in your benefits portfolio, you could be missing out on an opportunity. Retirement benefits are a key part of many workplaces, so not offering them could put you at a competitive disadvantage with clients.

If you haven’t already considered adding a 401(k) plan to your portfolio, now is the time to start thinking about it. According to a recent Prudential survey, 84% of benefits brokers and advisers believe that sales of financial wellness programs will increase in the next three to five years. On top of that, 57% consider it very important for their firm to expand sales of financial programs.

Incorporating retirement plans into your portfolio can seem like a daunting task — unless you choose to go with a provider that will handle the entire process including compliance management, financial education and fiduciary responsibility. Most `importantly, adding a 401(k) to your portfolio of benefits can be a big boost to you in terms of client satisfaction and retention, making their addition a worthwhile move.

Here’s why incorporating a 401(k) into your benefits portfolio puts you at an advantage with clients.

Clients are looking for a one-stop shop
Increasingly, clients only want one touchpoint for their benefits package. If you offer access to health and other benefits but don’t broker retirement plans, you aren’t providing a streamlined client experience.

Being able to provide a single touchpoint gives you a competitive advantage. If a client needs a 401(k) plan, and you don’t offer it, they’ll look elsewhere. If another broker has other benefits in their portfolio, it’s not unreasonable to assume that they might go elsewhere in order to get everything in one place. Whether a client is looking for a hub-and-spoke model or some other model, the more you have to offer, the more likely the client is to choose you as their broker.

By adding 401(k) plans to your portfolio, you also have the chance to bundle some of your offerings. Clients can choose from various packages with different benefits. Because you’re flexible and able to offer some custom solutions, clients are more likely to stick with you. The result is smaller client churn.

Adding 401(k) plans to your portfolio can also allow you to create a higher contract value. Clients understand that increased value means increased contracts. Many are willing to pay benefits brokers with comprehensive portfolios for a better experience and less hassle.

Clients benefit from 401(k) plans
One of the most important aspects of a benefits package is the retirement plan.

Among workers of all age groups, including millennials, benefits are valued above salary increases. Millennial turnover costs the economy about $30.5 billion each year, according to Gallup, and getting them to stick around is probably among your clients’ goals. Offering a comprehensive benefits package can help curb this and retirement benefits are among the most popular offerings, according to the American Institute of CPAs.

Clients are likely to see the following advantages when they offer a 401(k) plan:

· A boost in qualified job candidates
· Increase in employee retention
· Tax benefits that come with offering retirement plans
· Ability to offer financial wellness options to employees

That last item might seem a little unusual until you realize that financial stress reduces workplace productivity — to the tune of $300 billion per year. Employers that offer retirement plans, as well as other financial wellness benefits, can reduce employee stress and improve productivity.

Choosing the right 401(k) plan for your portfolio
As companies become more focused on building financial wellness programs for their employees, they are turning to 401(k)s as a starting point. In the past, brokers have been hesitant to offer 401(k)s because the general belief was that they create extra work for them.

Additionally, some brokers were put off by the increased responsibility of IRS regulations, fiduciary responsibility and compliance monitoring. Taking on the burden of these duties can feel intimidating due to the rules, regulations and paperwork that are associated with them.

But if you align yourself with the right 401(k) provider, all of these processes should be handled entirely by them, in turn, making it easy for you to sell 401(k)s without having to understand all the nuances that come along with them.

Where do you start if you’re looking to add a 401(k) plan into your portfolio? When looking into providers, make sure their 401(k) benefit goes above and beyond a cookie-cutter plan that requires a lot of work on the part of you and your client. Instead, make sure that the provider you are looking to partner with offers the following plan features:

· Full-service and smart automation. The less time your clients need to spend managing their plan, the more time they’ll have to focus on their business’ needs.
· Low-cost index funds. For the average investor, simple is better. Low-cost index funds give employees diversification without racking up fees – even a 1% investment fee can lead to tens of thousands of dollars less by retirement.
· Predictable and low fees for employees and employers. According to Transamerica, 41% of business owners don’t offer 401(k) plans because they’re concerned about the cost. The fewer costs you pass onto your clients and their employees, the better.
· Complete compliance management and fiduciary responsibility. Compliance and fiduciary standards can be a headache. Saving your clients from having to deal with them can keep them happy.
· Online plan setup and payroll sync. Setting up a 401(k) plan and managing contributions used to require what seemed like endless paperwork. Getting a plan that streamlines that process will save both you and your client’s time.

When you add 401(k) plans to your portfolio, it’s important to realize that there’s a layer of compliance that comes with retirement plans. Employers don’t want to have to bother with that, so a broker that can offer compliance management as part of their retirement benefits portfolio can easily stand out from the crowd. Additionally, easy plan administration and online setup can also help you stand out as a benefits broker.

If you haven’t worked with 401(k) plans before, you should consider starting with smaller plans or groups – as opposed to larger, more complex programs – and align with a provider that specializes in the smaller 401(k) segment.

In addition, make sure to use a provider that can integrate into your current benefits package smoothly. They should be the ones taking on the heavy load of 401(k) management. Make things easier for yourself and your clients by going with a provider that makes it simple for employees to participate in a plan.

As a benefits broker, adding 401(k) plans can be a good move to expand your ability to serve your clients. Clients need access to good benefits packages that will help them attract and retain employees. However, employers don’t need to be picking up their benefits piecemeal. A good broker can use their portfolio to provide everything a client needs in terms of benefits.

Sit down with your clients, show them the advantages of using you as a one-stop shop for all their benefits needs — including retirement plans — and you could cultivate profitable and long-lasting relationships.

For reprint and licensing requests for this article, click here.
Adviser strategies Client strategies Client communications Retirement planning Retirement benefits 401(k) Benefit strategies Benefit management