FA-IQ reached out to retirement-focused advisors ranked on the Financial Times FT 401 list of top advisors to ask:
What’s the most effective means to turn plan participants you work with into individual clients?
Randy Breaux of Breaux Benefits Group in San Francisco, has been an advisor for 44 years and manages $100 million:
Financial advisors need to be crystal clear [about] what they are offering, otherwise they can quickly run into conflicts of interest when looking to convert plan participants into private wealth clients. Besides their plan’s investment advisor, I always recommend participants have three financial experts in their lives: a financial planner, a CPA or tax preparer, and a trusts and estate professional. And ideally, those three individuals should be kept separate.
So, before you even attempt to provide private advice to plan participants, you need to make sure your organization has the correct structure to provide a conflict-free service to all involved, and have a good network of professionals you can refer clients to for their tax and accounting needs.
I tell participants that they need a fee-only financial planner — not a commissions-based salesperson, or even a fee-based advisor (because fee-based advisors are likely to still be in the business of selling products).
I also tell plan participants to only deal with FAs who can demonstrate they have no conflict with their plan sponsor clients. This is for the good of both the participants and the sponsors alike. If you are an advisor working for the plan sponsor, you have an obligation to be transparent with the corporate client and fulfill your fiduciary duty to them. Corporate clients don’t really want you selling to their employees. On the other side, the plan participant needs a financial advisor who can service them free of any obligations to the individual’s employer.
So, the best way to service plan participants as private individuals is to make sure you’re offering fee-only advice, you’re clear about your relationships, and you ensure there are no conflicts of interest between corporate and private clients. And often that may mean picking a lane and sticking to it.
Chuck Williams of Finspire, in Schaumburg, Ill., has been in business 27 years and manages $1.1 billion:
We want to help participants think about their financial situations so that they can plan for the future and make better decisions. If they are in this mindset, they will naturally make little steps toward being more conscious about their financial health – and that can lead them to engage us for financial planning.
We’ve built our firm to answer questions plan participants have and help them achieve their goals through specialist services. We have financial planners, CPAs and access to estate professionals.
The key to engaging plan participants as private clients is to have multiple contacts with them in different media, such as additional enrollment sessions for the company, wellness and financial education information and ideas for employers to give to their employees — such as posters for the cafeteria, and generally information that helps participants think about their goals for the future.
However, none of this interaction or material should ever be soliciting in nature or talking specifically about investments — it needs to be more about a broader financial wellness program.
But education outreach isn’t enough. You need to provide prospects with the tools they need to use that education effectively. Most clients will come to us as a financial planning client rather than for wealth management. There’s potential conflict if you try to manage a participant’s wealth, but if you focus on the financial planning aspect, then you are providing a complementary service — one that people really need. Often there are enough tools in the 401(k) anyway to manage the client’s wealth, so providing financial planning is a natural fit.