Today’s Top Five 401(k) Opportunities for Investment Professionals
by Matt Riebel

Small Businesses are still struggling to recover in the wake of last year’s collapse of the financial markets and they face a challenging road ahead. Forty-four percent of small businesses are concerned about whether they can continue matching employees’ 401(k) contributions, according to a survey by Nationwide Financial Services. Survey participants included CFOs, small business owners, HR representatives, and others. Small businesses were defined as those with five to 250 employees.

Those who identified themselves as “small-business owners” are especially concerned. Fifty-one percent may have to reduce 401(k) contributions or stop matching them and 53% are worried about having to change their healthcare benefits.

However, three in four small businesses don’t expect the economy to affect their ability to continue offering a 401(k) plan altogether. Though small businesses are facing some tough choices, they clearly understand the importance of offering a 401(k). Sixty-four percent offer a retirement plan. Top reasons include helping employees invest for retirement and attracting and retaining talent.

Conversation Tip:
Talk to clients from the perspective of their employees and remind them why they started offering a plan in the first place.

Conversation Tip:
If your small-business client is thinking about reducing or eliminating the -employee match, make sure they’ve exhausted all other options first. Explain the long-term financial consequences that losing a company match can have on their employees’ retirement security.

What Small Business Clients Want From Investment Professionals

Seventy-seven percent of the small businesses work with an investment -professional to help achieve their goals. Seventy-five percent say the quality they value most in an investment professional is the ability to understand the company’s needs. Seventy-four percent value the advisor’s ability to help them meet the legal responsibilities that come with offering a retirement plan. Companies with five to 50 employees are more likely to say they need help meeting legal obligations than those with more than 50 employees.

Conversation Tip:
During your next visit or phone call, ask them if they feel confident in their ability to meet the legal responsibilities associated with the plan. If they need more help, offer a special meeting to discuss their concerns in greater detail.

Top Five Opportunities For Investment Professionals

Small businesses ranked their top five concerns about their 401(k) plans. You can use this information to develop customized -solutions:

1. Employee Investment Education – Thirty-one percent say their top concern is to give employees the investment education to help them make sound decisions about their retirement assets. This concern increases among plans with a larger asset size. One way to address this need is to host workshops tailored to employees. For example, if the company has a large number of workers over 50, consider offering a special workshop for those nearing retirement. Another way to help alleviate these concerns is to offer a managed account service to give retirement plan participants professional and personalized investment guidance.

2. Fiduciary and legal Responsibilities Education – Twenty-nine percent of small businesses say their top concern is over their fiduciary and legal responsibilities. You can help clients feel more confident by improving their knowledge of fiduciary issues and offering them warranty programs or other solutions to help them meet their obligations.

3. Assisting With Investment Options – The recent economic turmoil has made small businesses more aware of how important it is to choose appropriate investment options for their workers. Twenty-one percent say their top concern is over selecting and monitoring the plan’s investment options. Offer to meet with the plan more frequently to review investment options and make any necessary changes.

4. Explain the Fees – Retirement plan fees have become a hot-button issue in the financial services industry. Twelve percent of small businesses say it’s their biggest concern about their 401(k) plan. It’s important to make sure that the plan is working with a provider that’s committed to transparency and presents fees in plain English. Communications should make it easier for plan sponsors to understand what they are paying and not overwhelm them with too much information.

5. Automate it – Six percent of small businesses top concern is offering automated features to make investing easier. It’s a good time to discuss automated features with clients that have been reluctant to add these features. Features, such as automatic enrollment and automatic increase, can encourage employees to start investing early and increase their contributions gradually over time.

The survey makes it clear that many small businesses need help managing their 401(k) plans and they’re are looking for investment professionals who understand the challenges they face. By teaming up with plan providers that specialize in the small-business market, you can offer products and solutions that can meet your clients’ needs and help them maintain this important benefit for their employees.
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Matt Riebel is COO of Nationwide Retirement Plans. The Nationwide Group Retirement Series includes unregistered group fixed and variable annuities and trust programs. The unregistered group fixed and variable annuities are issued by Nationwide Life Insurance Company. Trust programs and trust services are offered by Nationwide Trust Company, FSB a division of Nationwide Bank. Nationwide Investment Services Corporation, member FINRA. In MI only: Nationwide Investment Svcs. Corporation. Nationwide Mutual Insurance Company and Affiliated Companies, Home Office: Columbus, OH 43215-2220. Nationwide, Nationwide Bank, Nationwide Financial, the Nationwide framemark, Life Comes at You Fast and On Your Side are service marks of Nationwide Mutual Insurance Company.