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Small business owners represent a significant opportunity for agents who sell retirement plan products.

Not only do they have substantial assets, but they are also typically so busy running their operations that they welcome the help a knowledgeable investment professional can offer, says Don Jones, national pensions sales manager for Nationwide Financial Services Inc., Columbus, Ohio.

Results of a recent survey commissioned by Nationwide suggest that agents selling retirement plans who do not target the small business market could be ignoring a substantial opportunity.

Respondents of the survey, conducted by independent public opinion polling firm Greenwald & Associates, Washington, D.C., include more than 700 owners of and decision-makers from businesses with 25 to 200 employees.

Among the findings is that fewer than half of all business owners considered more than one type of retirement plan when choosing one for their employees.

“One-size-fits-all plans are often accepted by small business owners because they dont realize that they have choices,” Jones says. “Many times, however, a business owners needs are better met by another type of profit-sharing or money purchase plan than by a 401(k) and nobody ever told them that.”

Jones suggests that investment professionals who work with providers that can customize a clients plan not only offer those clients an additional valuable service, but also gain the advantage of added credibility.

The survey also shows that among business owners top concerns about offering a retirement plan are cost (89%), fiduciary or legal issues (83%); the complexity involved (81%); and the time needed to administer a plan (81%).

Among those surveyed who have fiduciary concerns, 89% are worried about business or personal liability; 88% are concerned with providing enough plan information; and 86% are concerned with investment selection and monitoring.

Many small business owners dont understand how plans that limit their ability to seek a wide array of brand name investments for their retirement programs can increase fiduciary risk, Jones says.

“Investment professionals play an important role in explaining the benefits of plans that offer freedom of investment choice,” he adds.

According to the survey, the top reasons small business owners offer a retirement plan include concern for employee welfare (96%); positive effect on employee morale (93%); competitive advantage in recruitment and retention of employees (90%); and the ability to offer tax-deferred savings to employees (90%).

In choosing a retirement plan provider, 87% of those surveyed said they base their choice on the reputation of an investment professional and her firm.

“What these results mean to investment professionals is that to best serve the small business market you need to become a part of the business owners team,” says Jones. “Get close to their business and offer support other investment professionals dont offer.”

That help should include assistance in meeting fiduciary responsibilities, evaluations of cost and value, and solutions tailored to the businesss unique needs, according to Jones.

“Work with a local third-party administrator who understands the business and has a reputation for excellence,” he says.

“Small business owners are capable people, they want to know all the facts. When you leave a step out its like leaving an important ingredient out when youre baking–it doesnt come out right.”

According to Jones, the ingredients necessary for 401(k) success include: proper plan design; evaluation of cost and value; education on fiduciary issues; multiple fund choice without proprietary fund requirements; a clear understanding of why a plan is in a businesss best interests; a consultative, professional approach that highlights the investment; a professionals expertise and reputation.

“Small business owners cant be expected to be experts on every aspect of their retirement plans,” Jones says. “Investment professionals have an opportunity to grow their businesses by understanding small business owners needs, providing tailored solutions and offering individual advice.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 10, 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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