Working with small businesses on retirement plans

As financial advisors we deal with various client situations ranging from providing personal finance advice, long and short term planning and even business initiatives. One such service that we offer requires a unique approach: working with small business owners. 

It is necessary to focus on all aspects of their businesses including navigating the waters of retirement plan options to find a solution that works for the business owner, company and employees.  Developing such a plan requires finesse in that there are more parties to consider and each must be handled with care. 

Regulations constantly change and those advisors not actively managing retirement plans for small businesses may miss out on providing important information to small business clients looking to implement or improve retirement plans. Thus, it’s critical to create and maintain a systematic plan to review retirement plan options.  In the end, this will help you, the financial advisor, and the business owner take better account of the dynamics within the company itself, including size, revenue, capitalization, ownership, etc. among other factors. 

Educating the “Plan Sponsor”

When a small business owner approaches you for help in creating a plan for their company, be sure to explain their role as a “plan sponsor.” The duties of the plan sponsor include deciding on the type of plan, investment choices, and determining the company’s participation or contributions.

Ideally, sponsors should have specific goals in mind before they come to us, but it’s our job to help them focus on their goals because what worked for one company may not work for them. While common goals include the lowering of costs, increased participation, improving returns and protecting fiduciary responsibilities, smaller companies may focus on increasing the benefits for the owners and/or key employees. 

Generalist vs. Specialist

Retirement plans have always been a specialized area, and despite the fact that we as financial advisors represent ourselves as knowledgeable with retirement plans, the fact remains that we — along with planners, registered reps and insurance professionals — are all very different.  Within each group, our expertise varies greatly. 

Generally there are two types of financial advisors: generalists and specialists.  My experience is that the vast majority of financial advisors fall into the generalist category.

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