also help sponsors avoid common errors, he says. For example, the sponsor may
neglect to deposit deferrals in a timely manner or miscalculate the safe-harbor
match. According to Clark, micro plans usually need more compliance education.
advisers can make an impact by providing education to, and getting to know,
participants, Clark says.
With all the
needs of small and micro plans, it is understandable that they may demand more
of an adviser’s time. Clark says how advisers approach the two key tasks
performed for the plan sponsor—monitoring the investment menu and communicating
to participants—determines how much time they spend on the plan. Both Clark and
Connelly say start-up plans require the biggest time investment.
says, more software is available now to aid in serving small plans than even
five years ago. He says, since the Department of Labor (DOL) presented its
final fiduciary rule, he has been seeing software firms jump into an aggregator
role. At a minimum, this means they are integrating recordkeeping service
provider data with standard investment reporting, he says. “In a nutshell,
these service providers are offering the adviser one site for all their
reporting needs to satisfy the fiduciary role for defined contribution [DC]
points to the expansion of digital services that help advisers serve small-plan
sponsors—for example, mobile enrollment and participant education that is
provided on digital devices. According to her, major broker/dealers (B/Ds) and
wirehouses are also creating tools and services for advisers. Both she and
Chepenik cite LPL, which has built out an entire suite of tools for advisers in
the small-plan space.
also notes the advantages if the adviser signs on as a 3(38) investment manager
for the plan, calling it a win-win for both. “The plan has additional
protection, and it is helpful if the adviser is using the same lineups for his
or her [other] small-plan business,” she says.
be a challenge when these plans can take up so much time, but Clark and
Connelly say advisers typically vary what they charge, tying basis points (bps)
to asset level, starting at a minimum fee of $5,000.
often hear that small plans buy only on price, and, while some do overweight
cost in their decisions, Connelly says, for the last several years her firm has
seen many willing to pay for the value advisers contribute. “They may be
price-sensitive, but not all are buying cheap,” she says.
recommends that advisers be careful which small clients they take on. For
example, does an adviser want to do a lot of work for a company that may be
acquired in a year? In addition, he says, “If the plan sponsor is not committed
to get employees into the plan and promote it, it becomes my problem, and I
don’t want it,” he says. “You have to be intentional in your business plan and
specific about which clients you pick up.”
plans may need more guidance and education.
should be diligent about helping small plans avoid common errors.
there are a host of software programs, tools and digital services to make it
far more efficient for advisers to serve small plans.