Not necessarily. According to Meghaan Lurtz, Ph.D., a leading global expert on the psychology of financial planning, this can be a sign of looming danger for your relationship.

Fix, Fine, Flourish: How (and Why) Clients Fall Out of Love With You

In her recent article on Michael Kitces’ blog entitled Fix, Fine, Flourish: A Framework To Take Clients From (Just) “Fine” Stagnancy To Being Engaged Again, Lurtz breaks down a typical client’s journey into three stages.

The first stage is “Fix.” Clients seek out a financial advisor when they have immediate financial concerns to address, and as their chosen expert, you’re able to gain their trust and gratitude in this phase by helping them to stabilize their financial situation and set themselves up for a lucrative future. Nice work!

The second stage is “Fine.” Once a client’s initial issues are resolved, they transition into the “Fine” stage, where you’re likely to hear:

“Nope, don’t need anything!”

“Everything’s still good!”

“Don’t call me, I’ll call you.”

These are the words of a satisfied and seemingly stable client. You’ve resolved their most pressing financial concerns; what more could they want?

A lot, actually. In fact, they don’t just want more from you—they need more, or they’re likely to leave after their upteenth “fine” monitoring meeting. 

What Your “Fine” Clients Are Actually Thinking

No matter how impressed or satisfied your clients were in their “Fix” stage, the farther they travel into “Fine,” those feelings will start to dwindle. With no new problems to resolve for your clients, you’ll have no way to continue proving your worth, and they’ll naturally start to value you less, weakening your relationship.

And then, one day, you might find yourself blindsided by a “fine” client dropping you to manage their finances independently. Why should they retain a financial advisor who, in their opinion, isn’t needed anymore?

According to Lurtz, the psychological underpinnings of this “fine” complacency lie in the end of history illusion. This cognitive bias leads individuals to believe they’ve reached a stable point in their lives, whilst vastly underestimating the likelihood of future changes. Research involving over 19,000 participants from ages 18 to 68 reinforced this; though participants generally acknowledged that significant change had occurred in the past, they believed relatively little would change in the future, regardless of their age. This distorted perception limits our ability to envision new goals and opportunities, even as our life circumstances, interests, and aspirations continue to evolve.

So, even if a client came to you just a year ago with a mountain of financial issues to address, they may genuinely not anticipate that ever happening again, and thus not see the need to stay on as a client.

How to Become Invaluable to Your Clients—Indefinitely

The “end of history” illusion is a huge detriment when clients see their financial advisor as a simple problem-solver—which they likely do, given that this was the nature of your relationship through the “Fix” phase. (You “fixed” their problems, and now they’re “fine.”)

The key to becoming an invaluable asset to your clients is to establish yourself as someone who helps motivated business owners reach their goals, rather than someone who just manages their money.

By educating your clients on the importance of proactive financial planning, you can open up an endless amount of opportunities for your relationship to thrive.

This brings us to the third (often skipped) stage of the client journey: “Flourish.”

Turn Your “Fine” Meetings Into an Endless Stream of Client Wins

In the last stage of her “Fix, Fine, Flourish” framework, Lurtz encourages advisors to take their check-in meetings from mere progress monitoring to “Flourish Meetings,” where you prioritize the client’s discovery, reflection, and growth.

An easy way to make this pivot is by asking your client reflective questions that delve into their evolving goals and aspirations:

• What significant changes have occurred in your life or business since our last meeting?
• What changes would make you feel more fulfilled?
• What are the biggest challenges in your business today?

Come prepared with a library of solutions to propel your clients toward their goals. Here are just a few that our top advisors have used to “wow” their clientele:

1. Client Goal: “I’d like to retain my talent for as long as possible.”

Financial Advisor Solution: “Small businesses have to get creative to compete with larger companies’ salaries and benefits packages. Have you heard about student loan matching?”

SECURE 2.0’s student loan matching provision is a game-changer for business owners. Employers can now match employee student loan payments with 401(k) contributions, even if the employee isn’t contributing themselves. This tackles the tough choice between paying down debt and saving for retirement.

Employees will love the early start to retirement savings and increased financial security, and employers will love the boost in talent retention and employee morale.

2. Client Goal: “I wish I had better retirement planning options for myself, but it is what it is.”

Financial Advisor Solution: “Actually, there’s an excellent option for business owners that I don’t think we’ve discussed yet. Have you heard of cash balance plans?”

Cash balance plans promise a specific benefit amount at retirement, which can be taken as a lump sum or moved into an annuity for regular monthly income. The employer makes all contributions based on an actuarial formula (percentage of pay or a fixed amount). Employees don’t contribute.

This is often favored by business owners due to potentially higher contribution limits than traditional defined contribution plans. Plus, it can be combined with a profit-sharing 401(k) plan to benefit all employees.

If you want to learn more about cash balance plans (and earn CE credit for it), register for our upcoming webinar with NAPA on April 2, 2025.

3. Client Goal: “I wish I could find more quality hires.”

Financial Advisor Solution: “Fifty-seven percent of millennials said they’d feel less stressed if their employer offered financial wellness benefits. Have you heard of Roth employer matching?”

Roth employer matching is a powerful option for business owners looking to attract younger employees who anticipate higher future incomes. It allows employees to contribute after-tax dollars, ensuring tax-free growth and withdrawals in retirement.

Want More Ways to Help Your Clients Flourish?

By embracing the “Fix, Fine, Flourish” framework, encouraging your clients to think proactively about their finances, and offering a variety of services to reach their goals, you can transform “fine” clients into engaged, loyal partners.

If 401(k) offerings aren’t in your reengagement library yet, contact us. We’d love to help you overdeliver to your clients through every step of your relationship.

The post Why Happy Clients Ditch Their Financial Advisors (and 3 Ways to Re-Engage Them) appeared first on Fast and Affordable 401k for growing businesses.

These provisions are applicable to any client whose principal residence was in a federally declared disaster area or who sustained an economic loss by reason of a federally declared disaster. Examples of economic loss could include damage to personal property from fire, flooding, wind, or other causes; loss related to an individual’s displacement from home; and loss of livelihood due to temporary or permanent layoffs.  

How Disaster Withdrawals Work

A client can take $22,000 from all eligible retirement plans (401(k) plan, money purchase pension plan, section 403(b) plan, and governmental section 457(b) plan). A qualified disaster withdrawal from an eligible retirement plan must be before the date that is 180 days after the latest of

1. Dec. 29, 2022
2. First day of the incident period with respect to the qualified disaster
3. Date of the disaster declaration with respect to the qualified disaster

Your client may repay all or part of the amount of a qualified disaster recovery distribution to an eligible retirement plan if the qualified individual completes the repayment within the 3-year period beginning on the day after the date the distribution was received. If the distribution is repaid, it will be treated as though it were repaid in a direct trustee-to-trustee transfer so that your client doesn’t owe federal income tax on distribution. The 10% additional tax does not apply to any qualified disaster recovery distribution made to your client if repaid.

It is optional for employers to adopt the expanded distribution and loan rules. However, even if an employer doesn’t treat a distribution as a qualified disaster recovery distribution, your client may still do so through this form. However, it is important to note that your client’s employer must have a plan that is eligible for qualified disaster distributions. 

How Disaster Withdrawals Affect Taxes

Financial advisors should remind clients that any qualified disaster recovery distribution they receive should be reported on their federal income tax returns over the 3-year period beginning with the year of receipt unless they elect on Form 8915-F to include the entire amount in income in the year of receipt. The payment of a qualified disaster recovery distribution to your client must be reported as well on Form 1099-R.

To find out if your client was affected by a federally declared disaster and can use qualified disaster withdrawals, consult this list. Even in hard times, there are resources to help. 401GO will be there along the way to guide you and ensure your clients receive the care they need.

The post Understanding Qualified Disaster Withdrawals from a Retirement Plan appeared first on Fast and Affordable 401k for growing businesses.

We work hard to listen to our advisor partners, and have launched a cash balance education webinar series. the first episode will take place on December 11, 2024 at 1:30pm ET, followed by additional episodes every quarter for one year. Each will be an hour long and will include time for Q and A with 401GO’s COO Jared QKC, QKA and Head of Plan Operation Sue Hardy QPA, ARA — two of the leading experts in retirement planning.

The first episode is titled Cash Balance 101 and will approach the topic at an elementary level using plain language. Each subsequent episode will build upon the last, and all will qualify for CE credit.

This is your chance to become an expert on the cash balance plan: a topic that is growing in popularity despite being poorly understood by a significant number of advisors.

The post Announcing 401GO’s Cash Balance Plan Education Webinar Series appeared first on Fast and Affordable 401k for growing businesses.

The Genesis of State Mandates

There’s no doubt that Americans should be saving more for retirement. According to a 2019 survey, half of American households have no retirement savings at all, including almost half of all Baby Boomers, a generation that’s either already reached, or is quickly approaching retirement age. 

In an effort to address this crisis – and prevent future generations from meeting the same fate – many states have instituted mandatory retirement saving programs for small businesses. While each state’s legislation is unique, these programs generally mandate that businesses that don’t already give their employees a way to save for retirement offer them an employer-sponsored retirement plan or a state-run retirement program.

While we agree with the general idea behind these plans – more people should definitely save for retirement – the mandatory, one-size-fits-all government approach leaves a lot to be desired for small-business owners who like to stay lean, mobile and efficient. Here at 401GO, that’s our whole business model; helping small-business owners set up the best retirement plans available without all the hassle that goes with traditional investment bank plans. Still, state mandates are a good start.

Understanding State Retirement Mandates

So far, 18 states have passed state retirement legislation. California, Colorado, Connecticut, Illinois, Maryland, Massachusetts, Oregon, and Virginia have passed the laws and actively implemented the programs. New Jersey has passed legislation and scheduled implementation. And Delaware, Hawaii, Minnesota, Nevada, and New York have passed the laws but haven’t yet scheduled implementation. In addition, several other states are considering passing similar legislation.

These state-mandated retirement programs are intended to address the fact that only half of businesses with 100 or fewer employees offer retirement plans, and only 4 in 10 small business employees with incomes in the bottom quartile have the option of retirement savings through their employer. Employers in these states that don’t already offer retirement plans must offer either a private retirement savings program, or enroll their employees in a state-sponsored retirement program. These state-sponsored retirement plans are generally Roth IRAs; with this type of retirement account, employee contributions are deducted from their post-tax income, so their eventual retirement withdrawals will be untaxed. (This is in contrast to a traditional IRA, which is generally funded with pre-tax income, and which is subject to taxes upon withdrawal.)

Enrolled employees will contribute around 3% to 5% of their post-tax wages to their retirement fund. These state-mandated programs often require employers to automatically enroll employees, and use investment firms that are selected by state agencies – which is one of the programs’ biggest drawbacks. While government is great at rolling out large-scale programs, they generally don’t have the expertise to maximize the investments they handle. This is a great opportunity for savvy financial advisors to intercede; employees can opt out of contributions, and place that money elsewhere. 

There’s an opportunity with employers, too. Most states require employers to perform significant administration for these retirement plans, which is a specific area where financial advisors can offer valuable counsel. Steering small-business owners to use private retirement services like 401GO can pay big dividends; while these services often come with small fees, they offer a streamlined, simplified service. While the state retirement programs are free, they come with a lot of paperwork; in most states, there’s very little payroll integration, and deductions have to be done manually each month. Most busy small-business owners will gladly use a paid service if it frees up valuable bandwidth.

The Importance of Compliance

Finally, keep in mind that each state retirement program is unique, and comes with different deadlines, eligibility requirements and employer exemptions. Compliance and education is a big opportunity here. Financial advisors who want to advise businesses on this issue will have to stay current on the particulars of each program. In a rapidly evolving field like this, it’s best to stick to authoritative sources of information like state government websites, reputable industry publications and fellow financial professionals. 

While the exact standards vary from state to state, employer compliance is going to depend on two main factors: the number of employees they have, and how long the company’s been in operation. If the employer meets those standards, they then have to prove that they offer a payroll-deducted retirement savings plan for their employees, whether it’s a private account or through the state program. Each state also has a unique timeline for implantation; for example, Illinois is requiring all small businesses to come into full compliance by November 2023, while Maine is giving small businesses until April 2024.

Penalties for non-compliance can be steep. In Illinois, employers who don’t comply with the state mandate face fines of $250 per employee for the first year, and $500 per employee in year two. In Oregon, non-compliant employers could face fines of up to $5,000 per calendar year. 

Retirement Mandates: Stay Tuned

Big picture: State retirement mandates are probably a net gain. They’ll get more people saving for retirement, including a lot of people who’ve never had the opportunity to save for retirement through their job. Still, they’re best viewed as a starting point. Many employers are going to opt to offer their employees private retirement plans, and they’ll need help implementing these programs, and managing the massive administrative burden that goes along with them. They’ll also need advice on choosing the appropriate plans for their diverse workforce, and how to maximize participation rates. Above all, they’ll need help managing costs.

There’s a massive opportunity here for motivated financial advisors who specialize in outreach and education, who can proactively help employers handle the requirements of these new mandates.

The post How Financial Advisors Can Assist with State Retirement Mandates appeared first on Fast and Affordable 401k for growing businesses.

Since the more participants you have, the better your plan works, we want to go over with you some ways in which you — or your financial advisor — can encourage and successfully convince employees to participate in your 401(k) plan.

Why Should Employers Care About Participation Levels?

At the most basic level, the best reason to care about whether your employees participate in the 401(k) plan you sponsor is because you want them to make good, sound financial decisions for themselves, and you know that saving for the future is a critical aspect of this decision.

However, even at a small business, you may very well not be aware of some of your employees’ personal hardships. They may be struggling under a mountain of debt from medical bills or college tuition. They may need every dollar to help care for elderly relatives or disabled children. They or a family member may be fighting a drug or gambling addiction. All these scenarios can result in an employee deciding to forego saving for their future.

But even if you think it’s not your place to get involved in your workers’ financial decisions, there’s another important reason for upping employee participation in your 401(k) plan — the more participants you have, the more you and other highly compensated employees can contribute to your own nest egg, due to federal regulations regarding the ratio of contributions from each group.

Why Aren’t Employees Contributing?

Reasons workers who aren’t contributing to a 401(k) give for not doing so besides wrestling with debt include giving priority to building an emergency fund (which is more accessible than funds in a retirement account), not having enough income to sufficiently cover daily expenses and preferring to delay 401(k) contributions in favor of funneling income toward purchases such as cars, vacations, electronics, etc.

And although employees often don’t mention it, another big reason they don’t contribute to an available 401(k) plan is that they don’t understand the benefits, which brings us to our first strategy for boosting 401(k) participation: education.

1.       Educate Employees on the Benefits of Contributing to a 401(k)

Many companies provide little in the way of education around investments and 401(k) plans, and some provide none. If you are a small-business owner or a financial advisor working for a small-business owner, you may be in the latter category. We get it — your priority is running and growing your business, not holding your employees’ hands. But if you’re reading this, you have likely already decided that sponsoring a 401(k) plan makes good business sense, so you might as well take the next step and commit to putting some effort into boosting participation in the plan you took the time to choose.

You could email, snail mail or hand out some generic investment advice to your employees, and this may be helpful for boosting participation, but if it’s not, we have some insight into why.

a.       People tend not to read unsolicited mail, even (or especially) from their employer.

b.       The text may be too complicated or technical for some of your employees to understand.

c.       They may want to read it and intend to read it, but never actually read it.

Studies show the best way to get more employees to participate in your 401(k) plan is to hold individual meetings with them. Yes, that takes time, and time is money, but if you do your research and get a handle on why this problem may exist at your company in your area of the country, you can craft a presentation that hits on the major pain points and use it over and over for each employee, leaving a couple minutes at the end of each meeting for questions.

Even if you aren’t that concerned with your personal contribution level and that of your highly compensated employees, you will still benefit as an employer who is invested in their workforce’s 401(k). With an optimal vesting schedule, employees will be more loyal to your company, and they will spend less work time worrying about their financial situation.

If for some reason individual meetings are truly not possible, consider making a video (or having your financial advisor do it) that hits on the major points you want to make, and show it at a mandatory meeting. While some employees may zone out, this method is still better than sending them mail they may never open.

2.       Make Participation Automatic

Today, many companies are choosing to make participation in the company 401(k) automatic. Whenever a new employee is onboarded, they are automatically enrolled in the 401(k) plan. Since participation in a 401(k) plan cannot be made mandatory, employees are allowed to opt out. But most won’t. That’s because one major reason employees don’t join their company-sponsored 401(k) plan is because they never get around to it. Procrastination is real, and it costs people money. 

Imagine if, instead of taxes being taken weekly out of workers’ paychecks, that they were instead tasked with setting aside the money and paying it themselves each year. Mandatory enrollment results in higher enrollment.

Plus, a tax credit is available to companies that start a plan with an auto-enrollment feature. This makes it a win for employees and employers.

3.       Offer an Employer Match

A matching employer contribution can make a big difference in the level of employee participation in your 401(k) plan. When an employer matches employee contributions, the employee feels more as though the employer is invested in their financial well-being. The employee feels more valued and the employer-employee relationship is strengthened.

Additionally, since so many employers offer matching contributions, if you don’t, your employees may be saving their money to invest at their next job — where the employer matches employee contributions.

Start Planning Your Strategy Today

Whether you are a small-business owner or a financial advisor, encouraging workers to invest in their retirement is good not just for them and you, but for the country as a whole. Financially secure people are happier, more productive and sometimes even healthier. They’re in a better position to help those who are struggling, so everyone wins.

If you’re thinking of launching a 401(k) program at your small business, 401GO is the provider to work with. You can get your plan up and running in as little as 15 minutes, at minimal cost to you. If you already sponsor a 401(k) plan, try implementing our strategies to boost participation, and see how your efforts can improve life for everyone at your company.

The post Strategies for Boosting Employee Participation in 401(k) Plans appeared first on Fast and Affordable 401k for growing businesses.

While some business owners may realize some distinct advantages of joining a PEP versus implementing their own 401(k) plan, there are some downsides to going this route, and at 401GO, we believe our Syndicate  option is a better choice.

How Does a PEP Work?

PEPs gained in popularity after Congress passed the SECURE (Setting Every Community Up for Retirement) Act in 2019, which made it easier for 401(k) providers to offer this multiple-employer plan.To be succinct, this federal law’s intention was to make it easier for workers in the U.S. to save for their own retirement. Many U.S. workers are employed by small and medium-sized businesses that don’t offer 401(k) plans, and that puts them at a disadvantage. Sure, they can (and do) open IRAs, but this method of saving for retirement falls short of a 401(k) in a number of ways.

With a PEP, a group of employers joins together and shares the costs and benefits of the plan in a way that a larger, more prosperous business is able to do on its own, similar to a purchasing co-op. A big difference is that with a PEP, employers from different industries and different geographic areas are free to band together. Before the SECURE Act was passed, businesses interested in this type of arrangement had to join a MEP (Multiple Employer Plan) comprised of businesses in the same industry. Now, with PEPs, companies have more freedom.

What’s the Draw of a PEP?

The bottom line with a PEP is that it may save some companies money. A PEP offers another advantage, which is that of relinquishing many fiduciary responsibilities to a third party. Instead of getting into the weeds of your 401(k) plan, your pooled plan provider takes tasks off your plate that can typically overburden you and your business, focused mostly on outsourcing many tasks to multiple service providers.  

On the other side, since 401GO assists with those same tasks by simplifying the process of starting and managing a 401(k) plan with features such as same-day setup, automatic notifications and no-hassle payroll integration, taking responsibility for your plan doesn’t need to be overwhelming.

If PEPs lower fiduciary risk as well as startup and management costs, why does 401GO offer our Syndicate?

What Is 401GO Syndicate?

Our Syndicate plan offers many of the same attractive benefits that MEPs and PEPs do. Syndicates are groups of participants looking to offer a great product to employees while spreading out the costs and responsibilities at the same time. Each member group gets to offload their plan management and administrative costs and functions. Additionally, it’s not just companies that can start their own Syndicate — it’s other entities as well, such as chambers of commerce.

Some of the perks that make Syndicate different from an ordinary PEP are the same ones that make 401GO such a great option for small-business owners.

Chief among them is quick setup. Other traditional 401(k) plans take weeks to set up, while at 401GO, you can become a plan sponsor in 15 minutes. Starting a Syndicate is fast and easy as well. Plus, when a business starts its own Syndicate, it sets the rules, such as when and what types of employees can join, what the vesting schedule is, how much the employer match will be and more. Being a sponsor gives you back some of the control you would give up by joining an established PEP. And there’s no guarantee of any particular applicant being granted membership in a PEP — who gets in and who doesn’t is up to the sponsor and/or the group itself. Additionally, sponsors pay no ongoing costs — only member entities pay. And because the fee is shared among members, it’s lower than each business would pay on its own. In fact, this is one of the major drawbacks with PEPs that not everyone is aware of: loss of control. 

What’s Bad About PEPs

Those who join PEPs thinking it’s a great way to offer their employees a valuable benefit while saving money at the same time may be sorely disappointed if they don’t understand the agreement fully, or if they don’t carefully read and digest the fine print before signing.

Worse, it can be extremely difficult to withdraw from a PEP once you’re in. Like any binding contract you sign, if you decide you don’t like the terms later and want to leave to sponsor your own 401(k), you may find that exiting is a long, drawn-out and expensive process. Additionally, if you ever close down your 401(k) plan in the PEP, you do not have control over the complete liquidation of assets and closure as it would fall on the PEP sponsor.

This is not necessarily because the PEP sponsoring group is untrustworthy or devious (although that is possible), but the sponsor makes the rules and the members must follow them, like it or not. You trade control and flexibility for monetary savings and reduced fiduciary responsibility (which may or may not be a good thing). These rules within the PEP can range from requirements to use the same payroll provider, same eligibility provisions (such as age and service), and additional costs relative to an audit.

Moreover, audit requirements have become easier to follow (starting in 2023) with the magic number that would require an audit (over 120) now being applied to those with an account balance, not those who are eligible to participate. For a PEP, this new counting rule does not apply. In fact, the PEP would require an audit if there are more than 1,000 participants overall. One clear and simple advantage of a Syndicate to the PEP is the reduced need for audits.

With a Syndicate, your plan is portable – or removable altogether, if you wish to dissolve the association. Additionally, employers retain the fiduciary control of their plan’s management with all the helpful automation to keep them informed to meet those responsibilities. While small business owners may not see this as a perk, it’s often because they don’t fully understand the process.

With a PEP, when you relinquish fiduciary responsibility to the pooled plan provider, you are not fully divested of liability. When you try to tease out the particulars, you will find that IRS rules on MEPs and PEPs are murky, difficult to interpret and constantly undergoing changes and revisions. Further, PEP sponsors are allowed to set certain rules regarding fiduciary responsibility, and each PEP can be different. Too often, employers learn that their PEP has all the power to make fiduciary decisions and changes, but leaves too much of the responsibility for what happens as a result of these decisions to the powerless members.

Syndicate & Financial Advisors

Financial advisors can help business associations and chambers of commerce get started with Syndicate, and ease the setup process for participating small businesses. You can help mitigate some of the fear that companies face when joining a group plan. Businesses want to be sure they can trust the person who’s taking the reins. Your clients already know and trust you, so you are the perfect person to facilitate the establishment of their Syndicate plan.

Assuming a pooled plan provider is honest isn’t the same as assuming they are good at their job, and both are critically important when managing MEPs, PEPs and Syndicates. Additionally, one of the most arguably widespread problems with PEPs is that members have no control over what type of investments they will be offered. It’s not unlike the Health Insurance Marketplace, which is so important to providing care for those who otherwise couldn’t get it, but in some locations may force subscribers to choose from among marginal, second-rate or downright bad plans. No one wants choices like that. 401GO offers Syndicate financial advisors excellent fund options — choices your members will appreciate.

Add to that the low cost, bundled automated services and live support when you need it, and you’ll see why so many financial advisors and small and medium-sized business owners choose Syndicate. Chat with 401GO today to learn more about Syndicate and our other retirement plan solutions.

The post The Hidden Dangers of PEP Retirement Plans appeared first on Fast and Affordable 401k for growing businesses.

Today, we want to help you with the decision about whether to include a financial advisor in your small-business 401(k) plan by going over some of the pros and cons.

Pros

1.       It can provide a valuable source for trusted guidance

One of the main reasons SMBs — or any company or individual — turns to a financial advisor for help is because they are not qualified to make whatever decisions lay ahead of them on their own, and they prefer to turn the job over to someone with the knowhow and confidence to do it. Your financial advisor can help you make initial plan design decisions, to best benefit both owners and employees, and they can further advise your employees about their individual investment options. Having an expert onboard who understands the financial world can give you needed reassurance about your choices.

Your employees, in turn, will feel much more secure investing in the 401(k) plan you sponsor, and thus will be more likely to participate fully in it. And the more participants you have, the more you and your highly compensated employees can contribute to your own accounts. 

Additionally, your employees will appreciate your dedication to their secure retirement and repay you with the loyalty and allegiance you want in a workforce.

2.       It can save money

Later in this article, we mention how hiring a financial advisor costs money, but doing so also helps you save money in a variety of ways. 

Besides offering astute investment advice to you and your employees and saving you from having to pay fines or penalties due to noncompliance with federal regulations, financial advisors can also regularly monitor and review the performance of the 401(k) plan’s investment options. They can analyze investment returns, evaluate fund fees, and make adjustments as needed to optimize the plan’s performance. This proactive approach helps ensure that the plan remains competitive and aligned with participants’ retirement goals.

3.        It can save time

Managing a 401(k) plan can involve administrative tasks, such as processing contributions, tracking eligibility and addressing participant inquiries (although 401GO makes it easy for SMBs by automating most of these tasks through your HR service provider.) 

Financial advisors can collaborate with plan administrators or third-party administrators to streamline these processes, allowing SMB owners to focus on core business operations.

4.       It alleviates compliance worries

Although 401GO makes it easy to get your 401(k) program up and running in as little as 15 minutes, oftentimes down the road an SMB must undertake tasks to ensure the company is in compliance with federal regulations governing 401(k)s. This can include scheduling audits, completing paperwork and filing forms. 

If this isn’t a responsibility you feel qualified — or interested — in taking on, your best bet is to work with an experienced financial advisor. Financial advisors can help navigate these complexities because they stay updated on legislative changes, ensuring the plan remains in compliance. They can assist with required reporting, documentation and adherence to fiduciary responsibilities.

5.       It can be a prized perk

You can have your financial advisor go above and beyond, conducting employee education sessions, providing retirement planning resources and addressing individual questions or concerns. This personalized support helps employees understand their retirement options and make sound financial decisions, and they will no doubt appreciate your efforts.

6. It improves outcomes

Importantly, plans tend to have better outcomes, both for employers and for individual participants, when a financial advisor is connected. We estimate that advisor-led plans perform an average of 15% better, which can make a substantial difference for employees’ retirement plans. 

Cons

1.       It costs money

As a business owner, you probably know it takes money to make money, so the fact that something costs money doesn’t necessarily make it a liability, but nonetheless, the amount — and whether you can afford to spend it — needs to be considered.

2.       It takes time and effort

Another tenet of owning a business is that time is money, and the more time you spend finding the right financial advisor for you, the less time you have to spend growing your business. You may be able to neutralize this con by delegating the job of choosing a financial advisor to one of your employees, or another trusted individual.

401GO offers a partner pairing service, where we can connect you with one of our trusted financial advisor partners in your local area. Just ask!

3.       It’s a risk

The risk you take in entrusting your company’s 401(k) decisions to a third party that you probably don’t know very well is real. The decisions they make might not work out for you and your employees as well as you’d hoped. 

However, you can mitigate this risk somewhat by doing your homework before selecting your financial advisor. And remember that no investment decisions are foolproof, and even if some of your investments don’t do well right away, there’s no evidence that you would have come out any better if you’d made the decisions on your own, or if you’d used a different financial advisor. 

Some of your fears can be assuaged by understanding that fiduciary advisors are bound to act in the best interests of plan participants, providing guidance on selecting and monitoring investment options, managing plan fees, and addressing any conflicts of interest.

Is a Financial Advisor Worth the Investment?

The bottom line is that, like when you purchase any other service, you have to decide how much you think you need it and how much it is worth to you. A financial advisor can provide risk management and long-term savings strategies, potentially improving retirement outcomes for you and your employees. But if providing company matches to your employees’ accounts is already a bit of a stretch, this might not be the right time to hire a financial advisor. 

There’s nothing to stop you from making a change down the road and adding the service into your plan sponsorship. And in the meantime, you may want to take advantage of 401GO’s automated tools that offer some financial services.

The post Should You Include a Financial Advisor in Your Small Business 401(k) Plan? appeared first on Fast and Affordable 401k for growing businesses.

Do workers know something that legislators don’t? Or do lawmakers have selective vision when making rules that govern enormous pots of money?

Consider these very obvious problems.

Limited Choices

Some will say that a few choices are better than no choices at all, but that’s certainly open for debate. For example, in some states the default investment is intended to earn nothing. It aims to earn zero, and to lose zero. But participants pay for the privilege of putting their money in this non-interest earning fund. They would be better off stuffing their cash in the mattress.

Even with those investments that earn money, the dividends are usually small. An investor with a small amount of education and ambition could easily get a better return from a private IRA, a brokerage account, or sometimes even a money market account at their local bank. 

Limited Portability

Portability was touted as a feature of state secure choice plans, but it doesn’t take much looking to discover that portability of these accounts is a bigger problem than a solution. The idea of the account belonging to the participant instead of to the employer is solid, but the practicalities get in the way.

The portability only works if the participant moves from one secure-choice-participating employer to another. And since most states have fewer than half of their businesses participating, the likelihood of multiple jobs all offering the same plan is low. What happens to the state-run IRA account if the employee moves to a company with a 401(k)? What if the participant pursues employment in another state? 

Now the employee is saddled with an account that no longer functions as intended (as a payroll-deduction plan) and cannot be rolled into a 401(k). Participants are left to pay for an account they may no longer be using, or withdraw the funds and pay taxes on them. Most of these funds never make their way into another retirement account. Is this good for workers?

Limited Flexibility

Most of the states are implementing Roth IRA plans, which are good for some, but certainly not for all. Since they are designed to cater to a broad population, they are not suitable for everyone’s financial circumstances or goals, and they do not come with the ability to select a non-Roth option.

Roth accounts tend to be useful for younger workers, who will probably have a larger income in retirement than they do currently. They are often less useful for older workers who are at the peak of their earning potential. 

Roth IRAs do not allow employer contributions, so even those businesses that can afford it and want to contribute cannot do so with this type of plan. Add to that the much, much lower contribution limits of an IRA as compared to a 401(k), and you have two big reasons why the earning potential within a 401(k) is far greater than with an IRA.

And the flexibility problems don’t end there. High-income earners are often not eligible to contribute to an IRA. And those employees who have private IRAs already will not increase their savings potential at all, since contribution limits are not enforced per account, but rather per person. In fact, employees that aren’t watching closely could find themselves in trouble if they over-contribute because they now have two separate IRA accounts.

Government Involvement

Secure choice plans are all created by state legislation, and all overseen by government entities. Governments, even those in the most responsible states, are not known for their competence or efficiency, leading most small business owners to prefer that states engage a private company to provide the management. Do you really want the government involved in your retirement savings? Trust in government sits at an astoundingly low 14%.

The upside of government involvement (at least theoretically) is worker protections, but since state IRA plans are not subject to ERISA rules, those protections do not apply.

And consider the potential for political interference, turning retirement accounts into political weapons. Or changes to legislation that might make it difficult for workers to plan appropriately. Or restrictions to participants’ freedom to use their funds. And what happens if the federal government makes laws that interfere with the state laws?

Who really has the power over these plans?

Fees, Fees, Fees

Because state IRA plans are free to employers, it is the workers who pay all the fees. In some states these fees are within industry norms (at least for now), but in others the fees are very high. California, for example, charges almost a full 1% to participants, triple what they would pay with a privately-held IRA.

These fees add up over time, not just in dollar amounts, but also in lost growth. The fees paid to managing bodies are dollars that could have been earning much-needed dividends. And, if they are invested in funds that are not bringing a good rate of return, the fees could actually make them lose money in their retirement savings accounts.

Which leads me to wonder, who benefits from state IRA plans?

The Players that Benefit Most from Secure Choice Retirement

It’s hard not to see state-mandated retirement plans as a money making scheme for the government and a very small number of private companies. Just two big corporations manage almost all of the state plans. States are creating new regulatory and oversight boards, and vast bureaucracies to manage accounts and serve participants.

Increasingly, the movement looks like one big “good ol’ boys” club, aimed at enriching the wealthy and empowering the powerful at the expense of the average American employee.

It’s not as if the retirement industry was pure as the wind-driven snow before the states stepped in. The legacy retirement plan providers are behemoth companies that have spent their energy focusing on whales — the largest businesses with the wealthiest retirement plans. For four decades, they have ignored the vast majority of workers, those that work for small companies.

It’s no accident that the state solutions started coming about at the same time that fintech solutions were entering the market. The need was so great that someone had to act. But in terms of which has the power to make a substantial difference for workers, fintech 401(k) plans are vastly superior to state IRAs.

For the sake of brevity, I’ll just mention a few quick bullet points to illustrate my point.

• Contribution limits for 401(k) plans are almost 10x what’s allowed in IRAs, making them a much more effective savings vehicle.
• Employers have the option to provide funds to their employees within a 401(k), again increasing their ability to save.
• Most of the fees are paid by the employer, so the fees to the participant are kept within reasonable limits. Because fintech companies are relying heavily on automation, they are able to keep costs very low for both employers and employees.
• While 401(k) portability is not as good as it could be, it is possible to roll one 401(k) into another, or leave the old one in place for what is often a reduced fee.
• Scrappy fintechs provide much better customer service than government bureaucracies. Governments have no competition and don’t care if you leave them a bad review. 
• Fintech 401(k)s are built specifically for the market that is the most left behind and the most in need — small companies with fewer than 100 employees. In fact, even those with fewer than 5 employees can still get an affordable retirement benefit for their employees.
• New 401(k)s come with lots of tax credits. IRAs come with zero.

Don’t Fall for the Hype

If your company is one that is being forced to offer a retirement benefit, let me offer two pieces of advice. 

First, at least investigate a fintech 401(k) option before choosing the state plan. There is a reason why more than half of small companies will choose a private option over a state IRA, and another 25% of those that choose the state plan will change their mind.

Second, seriously consider seeking the counsel of a good financial advisor. Regulations and economic forces of all kinds are plaguing small companies, and a smart advisor could save your company thousands of dollars, as well as helping setup and manage a good retirement plan.

Stick it to the good ol’ boys club and talk to 401GO. We can help you get a good retirement plan setup in just minutes at a price point you can actually afford.

The post Is Secure Choice Good for Workers? No. It’s Not. appeared first on Fast and Affordable 401k for growing businesses.

This is good news for investors, and it’s good news for financial advisors as well, since studies show that more than 90% of investors go along with this default option and its algorithms, demonstrating their indifference or reluctance to managing their own financial investments. What do you — and your clients — need to know about how target-date funds serve investors, and how you can help them leverage the advantages these funds have come to offer?

Basic vs. Custom

TDFs are convenient for both participants and plan sponsors because they require little effort on anyone’s part, and they work. But how well do they work? Oftentimes they work well enough, but it’s a fact that a participant’s retirement nest egg could be feathered more luxuriously if they — or their financial advisor — had taken an interest in tailoring the funds according to the individual’s personal goals rather than merely their retirement age.

While it is legitimate for an algorithm to decide, based on a participant’s age, how much they will need in retirement, financial advisors know there are thousands of other factors to consider, including:

• Is the participant married and if so, does their spouse work and contribute to their own 401(k)?
• Is the spouse significantly younger (i.e., has more potential years to earn money)?
• Are there any health concerns on the horizon?
• Does the participant have other retirement vehicles such as a personal IRA or other assets such as a home, vacation home, investment property, business, stocks, jewels, a stockpile of rare beanie babies, etc.?
• What is the participant’s expected lifestyle in retirement? Will they live as they do now, or do they expect to move, downsize, travel extensively or make another major life change?
• Will the participant have substantial expenses in retirement such as paying for eldercare for themselves or their parents, tuition for themselves or their children, weddings, funerals, etc.?
• Does the participant have a large mortgage or a lot of debt to pay down?

The answers to the above questions could impact the level of retirement funds necessary by hundreds of thousands of dollars.

Help with Portfolio Design

Here at 401GO, we offer the services of an automated portfolio builder to help participants better tailor their investments to their needs and preferences. This tool is particularly helpful to participants who work with us because we offer so many more options — more than 100. This level of choice can feel overwhelming to some, which is one reason we created our automated portfolio builder — as a way for investors to participate in their retirement fund choices without feeling overload.

But the automated portfolio builder isn’t for everyone. Many plan participants are happy with their company’s TDF and the algorithm’s management and see no reason to tinker with it. It’s a great hands-off default for those who don’t want to give their retirement much thought.

Others desire more than our automated portfolio builder provides — the personal touch of a real live financial advisor. By talking to 401(k) plan participants personally, learning their goals, determining their tolerance for risk and factoring in other considerations, you can help craft a specific retirement plan just for them.

Important Changes to TDFs

You may be aware that TDFs used to come with fairly steep fees that could impact participants’ gains, but that is no longer necessarily the case, despite the fact that 70% of the TDFs are controlled by just three players — Fidelity, Vanguard and T. Rowe Price. Greater transparency, improved service and competitive fees have grown with the popularity of TDFs, making them more attractive to businesses across the U.S. Still, it can be worth it to your clients to see what some of the smaller players in the game have to offer as well.

The Future of TDF Management

While inflation, interest rates and other factors also have an impact on TDFs and how they are managed, these moving parts are what financial advisors and anyone in finance understands is simply part of the job of overseeing investment accounts.

When you’re working with small businesses, their employees or individual clients, remember that 401GO offers the fastest, easiest path to getting a 401(k) up and running, without any of the usual hassles or constraints. Contact us today for more information.

The post Target-Date Funds in 401(k) Plans appeared first on Fast and Affordable 401k for growing businesses.

Thus, your approach to engagement with clients — whether they are individuals or sponsors of a small-business 401(k) plan — must be sound, or you will never get the chance to demonstrate your superior skills. Effective client engagement encompasses understanding your clients’ unique needs, fostering trust and delivering exceptional service. 

In this article, we will explore the art of client engagement and discuss strategies that can help you grow your practice.

Develop a Client-Centric Approach

As a professional who deals with the public, your focus is on your clients and their 401(k) retirement plans. You may even have a template or form for them to fill out before your first meeting so that you have a better understanding of their goals, financial aspirations and concerns going into the initial conversation. That’s a sound start. But how can you improve the process?

One useful tool for financial advisors trying to differentiate themselves in a crowded field is the ability to anticipate clients’ wants, needs and concerns. A good grasp of anticipatory knowledge can be key in landing more clients. However, you must take care not to overdevelop your confidence in this area so that you believe you know what the client wants before they even ask. 

Many potential clients may be unfamiliar with 401(k) providers and 401(k) setups for small businesses, but it’s important to resist the urge to hijack the conversation by giving what may start to sound like a canned speech.

Build Trust and Credibility

Trust forms the foundation of any successful client-advisor relationship. Establishing credibility through transparent communication, ethical practices and a track record of delivering results is paramount. By demonstrating expertise, maintaining confidentiality and acting in your clients’ best interests, you can build trust and foster long-term relationships.

When you work with 401GO, the nation’s leading 401(k) company for retirement plans for small businesses, you automatically get a boost of credibility, as we are known across the U.S. for our stellar reputation in the arena. Working with an efficient, trusted 401(k) provider like us means you don’t have to spend time finding the right match for each of your clients — you’ll know who to turn to for help. The time you save translates into a bigger bottom line, a better standing in your field, more success and more satisfied customers.

Effective Communication

A fear many clients will have is that they will not be able to understand what they need to know to create a sound financial plan for their future. While some clients may be happy to turn this worry over to you and forget it, for many others, the unknown brings about anxiety.

Thus, when dealing with clients, it is essential to communicate clearly, using language they can understand, free of jargon or technical terms.

As important as using language clients can understand is having a system that ensures you keep in contact with them on a schedule. Regular and proactive communication about their 401(k) retirement plan, through various channels such as face-to-face meetings, phone calls, emails or newsletters, helps keep clients and small-business owners informed about their financial progress, market updates and changes in their portfolio.

Providing Exceptional Service

Too often in the service industries, clients find it difficult to get their service professional on the phone. Their lawyer, accountant or financial advisor may return phone calls late or sporadically. They make take a hurried attitude during meetings or they may seem to not be paying as close attention as clients would like.

Promptly addressing client inquiries or concerns, offering personalized recommendations and providing a seamless client experience can leave a lasting impression when it comes to managing a retirement plan for small businesses. By being responsive, you can build loyalty and establish yourself as the preferred financial advisor in your geographic area.

Provide Empathy and Emotional Intelligence

Financial decisions regarding 401(k) retirement plans often carry emotional weight for clients. Empathy and emotional intelligence are essential qualities that can help you navigate sensitive discussions, understand clients’ fears and provide reassurance. Showing empathy and being supportive during challenging times can strengthen client relationships and foster a sense of partnership with individual investors and small-business owners.

Continuing Education and Professional Development

Staying updated with industry trends, new financial products and regulatory changes is crucial for building client trust. Continuing education and professional development enable you not just to offer relevant and innovative solutions with respect to small-business 401(k) plans, but also to step in and save the day before it’s too late.

By investing in your own knowledge and expertise, you demonstrate a commitment to providing the best possible advice and service to your clients. As you earn certificates or complete coursework, don’t be shy — let clients know, either by adding the information to your website, posting on social media or including it in your regular communication vehicles.

Asking for Feedback and Demonstrating Value

Regularly seeking feedback from your clients demonstrates your commitment to continuous improvement in managing 401(k) plans for small businesses. Constructive feedback helps identify areas where you can enhance your services and address any concerns promptly. Additionally, demonstrating the value you bring to your clients’ financial lives, such as achieving specific financial milestones or optimizing their investment returns, reinforces the importance of your role as a financial advisor.

There are many methods of getting the client feedback you want. You can have surveys sent out via email, you can ask clients to post reviews either on your site or on a third-party site, or you can ask them directly during meetings and check-ins whether they are happy with your services and can offer any tips for improvement.

Parlaying New Skills into Greater Success

Building strong relationships as a financial advisor for clients investing in 401(k) retirement plans requires mastery of a combination of important skills. By adopting the strategies we have outlined and continuing to evolve while you hone your skills, you can ultimately build a thriving practice, with us as your trusted partner. Remember, strong relationships are built over time, nurtured through consistent communication and sustained by making a commitment to exceptional service and client satisfaction.

The post The Art of Client Engagement: Building Strong Relationships as a Financial Advisor appeared first on Fast and Affordable 401k for growing businesses.