By Chuck Hammond, AIF, PPC, CMFC
There’s one question I get more than any other. You have probably had this question, even if only to yourself. And my answer has recently changed.
Should I pursue doing more qualified plan business?
Many of us believe working with retirement plans is an excellent way to scale your business. So my answer ten years ago would have been yes.
However, over the last five years, I have made my reply more detailed. The first item to discuss is, “Do you enjoy working with Plan Sponsors and Plan Participants?” The answers vary, and some advisors love the interaction with Plan Participants, while others only want to work with the Plan Sponsor. There is no wrong answer; over the years, I have found that the majority of my professional satisfaction is because of the Plan Participants.
Working with the Plan Sponsors and Committees is interesting. It is detailed oriented and frequently feels antiseptic. You can, in this case, have your proverbial cake and eat it too. You can use technology to handle the investment review or outsource it. You can outsource the functions of the named Plan Administrator. If you choose, you can augment your interactions with Plan Participants with technology that gives them access to you on any platform. For me, though, it all comes down to a meeting with the employees.
If that gives you enjoyment, then yes, you should pursue doing more of this kind of business.
Start, or begin building a qualified plan practice. Remember, this is a complicated line of business to get into. Make sure you have the time to become familiar with all the moving parts!
To buy or not is the larger question. TAG Advisors is involved in many transactions and even more discussions about transactions. Over the past three years, we have seen advisors looking to move on to the next chapter in their lives struggling to sell the qualified plans they work with. Wealth management, employee benefits, planning, and even insurance aspects of an advisory firm are more manageable for a buyer to understand. However, the due diligence that needs to be applied to qualified plans is very different. Often the questions are slightly intrusive and can be uncomfortable.
The first is, “are any of your current plans involved in an IRS Audit or a DOL Investigation?” Another is, “when was the last time your plans were benchmarked?”. Non-specialist Advisors may find that question a little more revealing than they intended.
However, these two (along with many others) make up a list of due diligence questions you must be prepared to ask.
This article is by no means the “be-all and end-all” of the discussion. It is a very complex consideration for an Advisor. We haven’t even touched on how to “bulletproof” your qualified plan practice. However, it is crucial to consider that qualified plans are not “set it and forget it .” Both Plan Sponsors and Plan Participants should demand that their Advisors give them what is not only required but needed.
Should you pursue more qualified plan business? It can be a great way to accelerate your firm’s growth. Just make sure you either stay current on your skills and service or find a partner who can provide it for you.
Chuck Hammond, AIF®, PPC®, CMFC® is Managing Director, TAG Retire. He is responsible for outreach, education, and marketing and support on qualified plans, including vendor selection and monitoring. He is an active retirement plan advisor whose practice manages 26 plans. Hammond is perhaps best known as founder of The 401(k) Study Group, a community of 15,000 financial professionals involved in corporate retirement plans.
TAG Advisors is where independent, entrepreneurial financial professionals thrive. If you would like to explore what we can do for you, contact Cyndia Crafton at 877.676.6785 ext 530 or email@example.com.
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