What’s Your Plan for Your Best Clients’ 401(k)s? 5 Steps to Take Now

The 2013 year-end company 401(k) retirement plan statements have been opened, and the all-time high account values are filed away.

Bu this year is not likely to be such a powerful windfall year for 401(k) plan participants, and that means the challenge and opportunity of 2014 go hand in hand: It’s a good time to talk to your best clients, and let them know that the same investment strategies you provide them with in their after-tax investment accounts are also available for their individual company 401(k) retirement plans.

The concept of loss aversion was pioneered by Amos Tversky and Daniel Kahneman. The principle states that a person who loses money will lose more satisfaction than that gained by a person making money from a windfall. The same authors discovered that loss aversion leads to risk aversion: the preference of avoiding losses as opposed to making gains.

It has taken years for the U.S. stock market to get back to all-time price levels. Experienced investment advisors know that those same gains can be largely wiped away in a few weeks. Fears are growing among individual investors. The U.S. stock markets may be in the early stages of a much needed pullback, but it’s still scary.

You probably work with households in which both spouses work. Each of them is concerned about their ability to reach their ideal retirement dates with their current company 401(k) balance intact. Your best clients are afraid of losing their recent company 401(k) retirement-plan stock market gains. They want to have a conversation about how to avoid such losses with an investment advisor they trust.

The closer your best clients are to their ideal retirement date, the more they fear a repeat of another 2008-2009 stock market decline—and you should be talking to them about this.

5 Steps to Take Now With Your Best Clients

The largest investment assets that most clients own is their individual company 401(k) retirement plan accounts. There’s no reason that these investment assets should continue to go unmanaged. Here's what you can do:

1) Step Up  
Call the clients. Ask them questions about their company 401(k) retirement plan account. Tell them about your stock market risk management plan.

2) Talk to Your Best Clients
Have a conversation about how you can provide them with a solid level of investment management strategy for their company 401(k) retirement plan accounts.

3) Find Out Their Options and Returns
Get a copy of the complete menu of your best clients' company 401(k) retirement plan. Then get a copy of that 2013 year-end account statement.

4) Analyze and Compare
Analyze the options that the client has available, then compare that analysis to what the client currently owns.There should be a handful of prudent changes that can be made now.

5) Have a Risk Conversation
Finally, engage the client in a risk-management conversation. Find out how much the client is willing to risk of his or her 2013 stock market gains going forward.

The answer may surprise you, but the gratitude your best clients are likely to express to you shouldn’t be a shock.  

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