Banks Set Sights On Small Business Retirement Plans
Many banks see a huge opportunity in selling retirement plans to small to midsized businesses, experts say.
“If you look at the sheer number of businesses with under 500 employees, the vast majority dont have 401(k) plans, so the opportunity to develop the market is enormous,” says Eric Schneeman, chairman and founder of Plan Analytics Inc., a benefits consulting firm in Minneapolis.
Banks are already effective in prospecting their current client base in selling retirement programs to small businesses and their employees, notes Schneeman. “But theres still an enormous opportunity for them to do much more cross-selling.”
Ken Reynolds, managing director of the American Bankers Insurance Association, Washington, says a new study by ABIA found that 4.5% of his groups member banks introduced group benefit products last year. Many of these consisted of retirement programs for business clients.
Another sign of growing interest by banks in selling retirement plans is reflected in the recent pattern of agency acquisitions by ABIA members, notes Reynolds.
“More banks are acquiring agencies that have commercial coverages,” says Reynolds. “It used to be mostly smaller banks were buying agencies. Now bigger banks like Wachovia and Wells Fargo have begun to buy large agencies with extensive commercial coverages. It reflects that the larger banks interest in selling retirement plans and other types of benefits is growing.”
Bruce Ferris, vice president of investment services for Hartford Financial Services Group Inc., Simsbury, Conn., says banks are a big reason why 401(k) plans are his companys fastest-growing line of business. Its sales of these products increased 75% this year as of August over the same period last year in number of cases sold, Ferris says.
“Businesses look to banks for their retirement plans,” he observes.
Ferris says banks like strong wholesaling and sales support from insurance carriers, and Hartford tries to be strong in that area, fielding more than 180 wholesalers and over 40 retirement plan specialists to lend support to banks, furnishing services such as plan startup, employee enrollment and post-sale servicing.
Many banks look for proprietary retirement products from carriers like Hartford, Ferris notes, just as they do with mutual funds and annuities.
Offering such products for the bank to sell under its own name “allows us to be a better partner,” he adds.
Hartford offers over 70 funds, from which a banks business client can choose up to 44 as part of its 401(k) plan, Ferris says.
Nationwide Financial Institution Distributors, a unit of Nationwide Financial Services Inc., Columbus, Ohio, focuses on providing training and support to bank representatives to help them sell the retirement products, notes Matt Riebel, president of Nationwides bank distribution arm.
“Were often helping the bank investment rep identify opportunities,” Riebel notes. “In a lot of cases, they dont realize they have the opportunity.”
In addition to finding prospects within their institutions current clientele, Nationwide will also alert the bank rep to small business owners in their area who are candidates for pension plans, including those with existing 401(k) plans.
Nationwide also offers training for banks commercial lenders and trust officers who have a lot of contact with small business owners, Riebel says.
“We educate them about opportunities in investment areas that we can bring to (the) table to help them retain clients,” he explains. “Its a successful way to tap into that market.”
Nationwide can provide banks with plan administration services on a national or local basis, Riebel adds. And it will even send experienced retirement plan salespeople to make joint calls with bank reps on business accounts.
The company also offers banks a training program aimed at small business owners that bankers can use to show employers how to meet their due diligence obligations as plan fiduciaries, Riebel notes.