as cross-tested profit-sharing features, safe harbor plan designs,
and, in some cases, cash balance plans that work in tandem
with the 401(k). The success of these more sophisticated types
of designs will depend on the goals of the business owner, the
demographics of the plan, and the budget for contributions.
As small business plan sponsors strive to provide the best plans
possible, they are using benchmarking more often and are
comparing a wider variety of services. With so many smaller
plans in place now, and that number growing, this provides an
opportunity for advisors to add value.
“If you aggregate the micro, small and mid-markets together,
they account for almost $88 billion of assets under management,
through 36,000 401(k) plans,” says Rick Frink, divisional vice
president – 401(k). “From a scale standpoint, this is a huge
opportunity, especially when you consider that approximately
seven percent of those plans are transitioning to new providers
every year.” 2
Smaller businesses have unique needs that require careful
consideration and support. For that reason, benchmarking
activities will need to be tailored to each company’s situation.
Advisors should consider benchmarking the following:
• Value and cost, to ensure that plans are paying reasonable
fees and the value the plan is receiving supports those fees.
• Service and investment, to review the plan’s current vendor
and analyze its plan and investments to make sure the sponsor
is maximizing the value of the current offering.
• Vendors, to facilitate the transition from one vendor to another,
by comparing and contrasting competing vendors. In this way,
sponsors can understand how the transition will be handled by
the accepting vendor, and identify the one whose offering will
best match their needs and provide the most seamless transition.
Advisors are evolving to become an
extension of the plan sponsor
“We recognize that in small to mid-market plans, the daily
operation of a 401(k) plan is not always the most pressing
issue business owners have to deal with,” Frink says. “We
recommend that advisors position themselves as an extension
of the plan sponsor, providing input, resources, and time on the
advisor’s behalf.” This can mean doing things like setting times
for enrollment meetings and annual plan reviews, helping to
monitor participant deferrals, coordinating targeted enrollment
campaigns, and documenting key factors that impact the plan, to
ensure it is operating as effectively as possible.
Five Areas Where Advisers Can Help
Small and Midsize Plans
• Financial wellness and education
• Risk management
• Investment flexibility
• Plan design
Regulatory changes are heightening plan
Frink suggests advisors outline the services they will provide in
a written services agreement. This document should set realistic
expectations for what the advisor will do, and hold each party
accountable for what they need to do throughout the course of
the year. Those responsibilities may include the following:
• Setting times for enrollment meetings or annual plan reviews
• Helping monitor participant education, awareness, and enrollment
• Making sure that the plan is operating as effectively as possible
sponsor concerns about risk
Changes on the regulatory front in the past several years,
including requirements on fee transparency and a new rule from
the U.S. Department of Labor [DOL] that expands the definition
of fiduciary “investment advice” under ERISA [Employee
Retirement Income Security Act of 1974], have caused confusion
and raised fresh questions from plan sponsors about their
fiduciary responsibilities. Some plan sponsors believe they now
have new or different responsibilities, when in fact, they’ve been
fiduciaries all along. To compound this problem, most small
businesses have staff that wear many different hats and lack
sufficient time to devote to plan administration and compliance.
This creates an opening for plan advisors to provide education and
guidance, along with services that can help plan sponsors meet
their responsibilities and properly managing their fiduciary risks.
“Smaller plan sponsors need help understanding and navigating
their responsibilities,” says Tina Anstett, JD, director, Advanced
Markets – 401(k). “Compared to larger plans, they generally have
fewer internal resources who are dedicated to plan oversight or
are knowledgeable about the intricacies of defined contribution
plans. And unfortunately, many smaller sponsors had their
plans ‘sold’ to them years ago and have not made changes to
the plan, even though their needs have evolved. Advisors have
a tremendous opportunity to educate sponsors about their
fiduciary responsibilities and improve plan designs, so that they
meet the needs of participants and establish a strong governance
structure to ensure compliance.”
How advisors can maximize success with
small and mid-market plans
AXA encourages advisors to develop and implement a personal
sales and service delivery model that will outline their approach
to new business as well as ongoing service. Their model should:
• Identify their value proposition and detail how they will operate
in this segment of the market.
• Describe the technologies and resources they will leverage to
meet their clients’ needs – upfront and on an ongoing basis.
Working with the right vendor will be important, as vendor
tools and resources vary and can make a big difference in plan
• Establish an investment monitoring process for existing plans
and an education calendar for participants, and set dates for
plan reviews with the sponsor. Plan reviews offer the advisor
additional opportunities to add value by providing updates on
legislative changes or benchmarking in the marketplace.
2The SPARK Institute, 2016 SPARK Institute Marketplace Update.