I feel like the cowboy in the old Western movie that went looking for the bad guys. Most days I come home hunched over in my saddle, full of arrows and bullet holes. While I'm lonely, I don't want to be, and I would welcome your company in building a successful advisory business serving individual plan participants.
This might sound contrary to popular wisdom. Every year at the top financial industry conferences, there are seminars and speakers who urge investment advisors to grow their 401(k) plan business. This has been especially true the last few months regarding the new fee disclosure requirements for 401(k) company retirement plan participants.
I have read countless articles about the new “level playing field” for 401(k) advisors. I also have been educated to the fact that nearly every small company retirement plan sponsor’s business is now “up for grabs” due to the new fee disclosure requirements.
All the current headlines and marketing focus is on professional investment advisors providing advice at the company retirement plan level.
Sometimes I feel lonely providing investment advice to those most likely to benefit from a company's retirement plans—the participants. My loneliness is largely due to the fact that I have quietly and efficiently built an investment-advisory niche business over the last few years doing just that.
My registered investment advisory firm is not a provider of company retirement plan level investment advice. Intentionally, I avoid working with company retirement plan sponsors, human resource professionals and company retirement plan providers.
When I came up with this strategy, it wasn't intentional. To be totally honest, I just avoided all the things I hate to do. I don’t like committees, I don’t bid for my advisory services, and I could not write a request for proposal if the lives of my two children were at stake.
My company provides stock market risk management and relative strength-based asset allocation advice to individual company retirement plan participants. I started asking my existing clients about their individual company retirement plan accounts 14 years ago and I have never looked back.
The current focus of the financial-services industry is for investment advisors to build a 401(k) advice business at the company plan level is narrow and one-sided. In my experience there is much more satisfaction and career fulfillment providing investment advice to individual retirement plan participants.
Call me old-fashioned, but when everything that I read and hear tells me about the great opportunity to provide the same advice and services to the entire company retirement plan, I think that might be a crowded marketplace.
I have always thought that the best investment advice marketing opportunities come from existing client relationships, providing these clients with an expansion of the investment advice that I already provide them.
When was the last time you spoke with an existing client about how comfortable they are with the current holdings in their company retirement plan?
Ask that same question to a handful of your best clients, your neighbors, or the school parent you sit next to at your kid’s next sporting event. You will be amazed at the response, and you will fill your appointment calendar for months in advance.
As soon as you ask that question, you have entered the individual company retirement plan advice investment advice niche business.
ERISA law requires fiduciaries to act “solely in the interest of the plan’s participants.” Several of the new disclosure requirements for 401(k) plan advisors require providing “conflict of interest” and “fee disclosure” statements to individual company retirement plan participants.
These same investment fiduciary acts and disclosures are all part of what most investment advisors already provide to their clients. The only new part of your existing investment advisory relationship is the fact that the individual company retirement plan account balances will be included in the assets that you manage for that household.
For 2013, try the best asset gathering campaign in the history of the world. This campaign does not require postage, seminar expenses, client events, cold calls or Google ad words.
Call some of your best clients, and their spouses, and ask for a copy of their company retirement plan account menu. In that same conversation, ask for a copy of their most recent company retirement plan account quarterly statement.
Whatever investment management strategy you are most comfortable with, provide an analysis for that client of all the available investment options in that company retirement plan menu. Then compare that analysis to the options on the company retirement plan menu that the client currently owns.
There has to be an investment management strategy disconnect somewhere; too much large cap, not enough small- and mid-cap, too many bond funds, not taking advantage of a self-directed brokerage account option, etc. Most times it is a combination of all of the above.
Make the necessary investment advice adjustments now. The next time that the stock market gets volatile, provide an updated analysis. Ask for the name of your client’s best friend who works at the same company, and has the same company retirement plan investment management problems that you client has.
Congratulations. You are now an individual company retirement plan investment advice provider. You are now in a position to gather more existing client manageable assets than you ever dreamed were available.
Make sure you figure out how to get paid for this valuable service; either directly from the company retirement plan account with pre-tax dollars, or in most cases, with tax-deductible dollars from outside the company retirement plan.
I don’t want to continue to feel so lonely. There is plenty of individual company retirement plan advice business for everyone.