Start With Your Clients
One of the first things anyone getting into the business should do is develop a list of resources to partner with. It’s also important to understand why plan sponsors change service providers and brokers. This will help pinpoint what to look for and how to focus a presentation. Some type of tracking and prospecting system is also a must in order to follow up with potential clients in a timely and effective manner.
    The first place to look for prospects is existing clients. Which of your clients own companies? Who is the chief financial officer or human resources professional? Which lawyers and accountants help provide referrals? Industry-specific databases, such as FreeErisa.com and Larkspur, can be a source of names to prospect for 401(k)s.
    The next step is to determine the best prospects and how to reach them. A phone call may be appropriate. In other cases, you may decide to use direct mail or prospecting letters. (Whatever method you choose, always follow the procedures established by your respective broker-dealer.) Set up an initial fact-finding meeting to gather information about a prospect. Here are some excellent questions to ask:
• “What do you like or dislike about your current plan?”
• “If you could change anything about your plan, what would it be?”
• “Does your investment menu cover all of the asset classes?”
• “Has anyone met with you and explained your fiduciary responsibility?”
• “Has your plan ever failed a discrimination test or had to refund money to your highly compensated employees?”
    The next step in the sales process is the proposal. Schedule a follow-up meeting to review the findings and present a proposal. Create an agenda for the follow-up meeting to make sure all of the prospect’s primary objectives are covered in a clear, concise, and organized fashion. Research indicates that close ratios go up significantly when brokers team with a sales representative from the 401(k) plan provider and/or a third-party administrator for the finals presentation.
    Finally, closing a sale may require some additional work to convince the prospect that the broker is reputable and trustworthy. That could mean following up with phone calls, marketing literature, or interesting articles. Some clients even ask for references.

What to Look for From a 401(k) Provider
Not all 401(k) plan providers are equal. Is the provider recognized as leader within the industry? Does it have a history of innovation and a strong track record for service and support? With all the consolidation in the business, is it likely to be around in a few years?
    Something that’s very important to plan sponsors is a diverse selection of investment options from leading mutual fund companies. Many plan providers will offer extensive support – helping with prospecting, at finals presentations and at closing the sale. Client relationship managers will coordinate service to the plan sponsor and its employees after the sale. The client relationship manager provides installation support for new customers and coordinates enrollment meetings in conjunction with the broker to educate plan participants and facilitate the annual plan reviews for the plan sponsor.
    Plan administration is a critical component of any retirement plan. The plan administration or compliance component helps ensure that the plan meets IRS and Dept. of Labor requirements. Plan administration usually includes creating the plan documents, running nondiscrimination tests, and creating the Form 5500 on behalf of the client.
    In some instances, the plan provider handles plan administration. A third-party administrator that can customize plans to meet specific needs of small-to-medium-size customers can also handle it.
When selecting a plan provider, look for one with a robust selection of employee communication material to offer plan sponsors. Plan want participants to get information about their plan and its investment options, and about financial and retirement planning.

Fiduciary Responsibility Is More Important Than Ever
The volatile investment environment of the past few years has upset many retirement plan investors who’ve seen the balance of their retirement account swell and then shrink dramatically. These circumstances have been a challenge for many plans sponsors, especially regarding the choice of investments. How do they select the funds that best help meet the needs of their employees, analyze options objectively, and continually monitor the funds to make sure they continue to meet their participants’ needs? It can be an overwhelming burden when you add the demands of simply managing day-to-day and strategic responsibilities in today’s regulatory environment.
    All of these issues help make a plan sponsor’s fiduciary responsibility even more demanding and the concerns about the liability it brings an even more sensitive issue. Some defined contribution plan vendors help plan sponsors address their fiduciary responsibilities. This can range from materials like a “scorecard” for assessing a plan’s investment options to help plan sponsors select, compare, and monitor funds, to sample documents, such as an investment policy statement.
    Another option is a fairly new service that can provide give sponsors and their employees independent, unbiased, and professional investment advice and a recommended fund menu suitable to the participants’ demographics. With these services, an outside company drafts a plan’s investment policy statement, monitors funds, make changes to its recommendations, when appropriate, and accepts fiduciary responsibility as defined under ERISA Section 3(21)(A)(ii) for investment advisor services. The broker works with the plan sponsor and the outside company to gather the information to help plan sponsors choose fund menu selections.

Technology Support Is Critical
Technology and the Internet have changed the way just about every kind of product is delivered and serviced today and has raised consumers’ expectations. That’s why technology has become such an important competitive difference in the defined-contribution business.
Most providers offer things like toll-free customer service lines, Spanish-language customer service, and Web sites that enable plan sponsors and brokers to get up-to-date plan information and manage aspects of the plan. Online capability allows them to track investment performance, change invest options and contributions, apply for plan loans, and more. Some providers offer online enrollment as an alternative to paper or phone enrollments.
The defined-contribution market is one of the largest and fastest growing segments of the financial-services business. It is also one in which brokers can participate and succeed. Don’t miss this opportunity to give a valuable boost to your business and bring an invaluable benefit to your clients. q
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Susan J. Lewis, QPA, APA is general manager of defined contribution sales with ING. She is a registered representative of ING Financial Advisers, LLC (Member SIPC), which offers a complete line of retirement plan products and related services to employers of all sizes. ING and ING Financial Advisers are part of ING Groep, N.V., one of the largest integrated financial services organizations in the world. Lewis can be reached at (818) 936-1212 or susan.lewis@us.ing.com.