PLANADVISER - March/April 2018 - 51

highly compensated employees [HCEs]. So we're looking at
plan designs such as cash balance and defined benefit [DB
plans], " Warye says. " For other companies that are having
trouble passing nondiscrimination testing and that maybe
aren't providing much of a match now, we are talking about
automatic enrollment and auto-escalation, and even about
doing a stretch match to give participants the incentive to
save more. "
Help resolving routine operational questions. Many
companies with micro plans have no one on staff dedicated
solely to working on the retirement plan, says Warye, whose
firm serves a range of plan sizes. " We encourage our clients
to call us any day, about anything, " he says. " We may get
those types of problem-solving calls once a month from a
plan sponsor, and we are happy to help. "
Oftentimes with micro plans, CoSource Financial Group
LLC serves as the intermediary between the plan sponsor
and its third-party administrator (TPA), says Beau Beaullieu,
partner at the advisory firm, in Lafayette, Louisiana. " The
TPAs tend to talk in technical terms, so we translate that
to the sponsors in layman's terms, " he says. " The sponsors
really appreciate that. "
Personalized participant education. Sixty-nine percent
of this year's Micro Plan Survey respondents provide oneon-one
participant education via an adviser. " We find that,
the smaller the client, the more participant service it's
looking for, " says adviser Patterson McKinlay, principal at
Achieve Retirement in Denver. Many sponsors that do not
offer a match go this route, he says. " If we do one-on-one
meetings and give participants [retirement savings] gap
reports, the cost of that to the employers is significantly less
than the cost of a robust match, " he says.
Fee Approaches
Why have some plan advisers hesitated to work with micro
plans? " There's not a lot of dollars from an asset standpoint,
and our business is traditionally run on the basis of assets
under management [AUM], " Beaullieu says. " So the smaller
the plan size, traditionally, the smaller the revenue. "
Because of the low asset base and the intense work
often required, especially during the first year, CLS Partners
charges a flat fee to new micro-plan clients. " It helps
to ensure that I can continue to run the business at a profit, "
Pottichen says. " Then, once a plan gets to a certain asset
level, we'll change from a flat fee to an asset-based [variable]
fee. "
For a startup plan-and especially if the employer has
no match-CLS recommends that the employer pay the
recordkeeping and advisory fees, Pottichen says. So, the
participants pick up only the investment fees. " If employers
don't, we tell them, 'You're sticking your employees in a
plan with what amounts to a 2% annual fee,' " he says. " We
show the employer, 'Here's the difference that will make in
the participants' account balances over time.' "
Most of Achieve Retirement's micro-plan clients utilize
an asset-based advisory fee that participants pay, McKinlay
says. But he has started to see more clients adopting an
employer-paid flat fee. " It comes down to educating the
client. Once you speak to the owners of the company about
this, they realize, 'We have our assets in the plan, and
we have the largest amount of assets, so we're paying the
highest asset-based fees. Why not have the company pick
the advisory fee up as a business expense instead?' " he says.
" Once they realize that doing that will allow all participants
to accumulate more assets over time, it's a no-brainer. "
Keeping It Profitable
Asked about how to keep these client relationships profitable,
sources most often referred to a couple of strategies:
First, clearly spell out the service parameters upfront. For
Benefit Partners' micro-plan clients, Warye says, that typically
includes main elements such as one annual meeting
with the sponsor for a plan review and fund-performance
review, one annual on-site day for participant education,
and quarterly investment reports aligned with a plan's
investment policy statement (IPS).
" It has to be a frank conversation with the plan sponsor,
and the expectations have to be set really clearly, " says
Beaullieu. If his firm has issues with unexpected demands
on its time after that, he says, those rarely come from sponsors.
" The demand comes from employees who are in need
of additional information, so we work hard to get them that
information, " he says.
Second, make on-site time very productive. " We keep
the group education meetings short and sweet, maybe 20
minutes, " McKinlay says. " And then we'll do one-on-one
participant meetings. But we tell participants, 'Don't come
to the meeting just to set up your password and user name
for your participant account.' " Achieve Retirement finds
it more effective to spend that time talking about crucial
issues such as deferral rates and investment selections.
" While we're on-site, we try to be as efficient as possible, "
Beaullieu says. " We knock out as many things as we can.
Very often in a day, we do a plan review with the sponsor,
then a group employee meeting and then one-on-one
employee meetings. " -Judy Ward
KEY TAKEAWAYS
* Micro-plan clients most commonly want help with
understanding their fiduciary responsibilities and
industry terminology; plan design; and personalized
participant education.
* Charging a new micro-plan client a flat fee and then
moving to an asset-based fee as the plan grows can
ensure profitability.
* Set precise service parameters with clients, so they
are clear on your deliverables and their timing.
* Leverage your on-site time at the client by scheduling
retirement committee, group education and individual
participant sessions all on one day.
planadviser.com march-april 2018 | 51
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PLANADVISER - March/April 2018

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