I often speak with advisors, particularly in the 401(k) market, who pass over small accounts because they don’t believe they have enough profit potential. PLANADVISER’s 2019 Micro Plans Survey presents insights based on data gathered from 4,000 plans. One-third of these defined contribution plans have less than five million dollars in assets and are considered micro plans. The survey highlights the advantages of working with smaller accounts while providing actionable data to take advantage of this promising market.
Advisors in the micro plan space received higher marks for their ability to build relationships with clients and provide group or one-on-one participant education. They also stay in step with those serving larger plans in terms of reviewing fund performance and providing investment guidance. The ability to develop personal rapport with clients in the micro plan market sets a solid foundation for advisors’ business growth.
Evaluation of provider feesThe survey revealed that micro plans lag behind their larger counterparts in the following areas:
- Benchmarking plan design
- Creation and monitoring of investment policy statements
- Guidance in the selection of providers
PLANADVISER revealed that “34% of those micros reported having no formal plan success measures, whereas that was the case for only 21% of all plans.” With consideration of the aforementioned plan elements, advisors may find it beneficial to use the following benchmarks to gauge success and close the gap between micro plans and larger plans:
- Participation rates
- Deferral rates
- External benchmarking plan design
- Participant savings to match
- Appropriateness of participant asset allocations
Many advisors share the desire to make a positive impact by helping people manage their finances and reach their retirement years with confidence. To that end, micro plans provide great opportunities that are well worth your time and effort. Advisors can boost their bottom line while building personal relationships that fuel the passion and purpose behind their work.
The study found that 62% of plan holders in the micro category are already working with an advisor, which means there are still significant opportunities for improvement and growth. I hope this article provides clarity and direction for current and future advisors to be more proactive and see growth in their micro plan business.
RetireReady Solutions is used by advisors to service plans of all sizes, but I always enjoy hearing how our software is being used on a personal level to make a significant impact on Americans’ quality of life.