Small-Business Market For Retirement Plans Is Wide Open

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“Small businesses are the best prospects in the world,” says Sid Friedman, president of Corporate Financial Services in Philadelphia.

For instance, he says “business owners are aware of retirement plans, but no one has sat down and talked with them about it.

“They don’t know the differences between 401(k) plans and SIMPLE plans, defined benefit and defined contribution plans,” Friedman continues. “They’ve read about it in the papers, but they don’t understand them.”

A recent report on small businesses from LIMRA bears out a lot of what Friedman says, revealing that a high percentage of those smaller businesses surveyed have no retirement plan in place at all. (See chart.)

As part of the study, businesses were asked to rank employee benefits in order of importance. The study showed that 71% of those companies surveyed already have what is, in their opinion, the most important benefit: health insurance. Retirement plans, judged the second most important benefit, are not as widely available.

At firms with 9 or fewer employees, the study shows that only 37% have some form of retirement plan. While this group has the lowest availability of retirement plans, it encompasses 83% of the study’s population.

Nevertheless, the research indicates that there is high interest in retirement plans among small-business owners, making this an excellent opportunity for agents in this market.

The report notes that with the aging workforce, demand for retirement plans is expected to increase.

At Guardian Life Insurance Company, agents offer solutions in four problem areas for business owners, says Leon Wynter, manager of public relations for Guardian in New York. “Recruiting, retention, reward, and retirement. We use a combination of insurance and investments to compensate key employees during their tenure or retirement,” says Wynter.

In addition to highlighting the opportunity for employee benefit retirement plans, the report also shows there is opportunity for business continuation planning.

According to the study, 42% of the businesses surveyed have no formal business continuation plan. This comes at a time when more than half of those business owners are over age 50. One reason for the low numbers among this group is due to the lack of consumer education, the LIMRA report states.

“Its our fault,” says Friedman. “We haven’t been able to see them, agents today aren’t doing enough prospecting, they aren’t seeing enough people.”

This lack of consumer education has attracted the attention of LIFE, the Life and Health Insurance Foundation for Education.

LIFE is currently developing a program targeting small-business owners. Working with the Service Corps of Retired Executives, LIFE is creating a series of seminars dealing with the problems small-business owners face in the areas of succession planning, business continuation planning, and benefits, says Bruce Mendelsohn, manager, industry communications for LIFE, Washington D.C.

Friedman says the key to success in the small-business market is activity. “People are waiting for our help, we need to go see them,” he says.

When dealing with advisors, the report shows that almost eight in 10 business owners seek advice from their attorney, while six in 10 will use their accountant to draw up a business continuation plan. (See chart.)

The report notes that these results illustrate an increased importance for planners and agents to work with attorneys and accountants as a source for referrals into this market.

At Guardian, “agencies put on seminars in their local areas for centers of influence, including CPAs, lawyers, and brokers,” says Wynter.

Friedman agrees. “I do private briefings with CPAs; it’s been very effective,” he says.

“In fact, I’d rather see the CPA before I see the client,” he continues, “then present a solution to the client as a team. CPAs are the best place to start.”

Agents can start getting into this market by mining their existing book of business. The LIMRA report shows that small-business owners would rather deal with advisors who have helped them with their personal planning.

Friedman concurs, “I was so busy writing new business that I forgot about what I had on the books, they are the best people to go to. Now I contact them monthly with newsletters and the calls come in.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, August 27, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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