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Retirement Planning > Retirement Investing

I Was a 401(k) Robo-Advisor and Didn’t Know It

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Like many advisors, I’ve read a lot of articles about robo-advisors lately, and now I know: I’ve been a successful model for today’s robo-advisors since 1999.

Fifteen years ago, I began providing investment advice to individual company 401(k) retirement plan participants. I used what was then state-of-the-art investment advice technology to sort through the confusing labyrinth of a company 401(k) retirement plan menu.

I then formulated a management game plan for asset allocation and stock market risk. Next, I explained that game plan and the steps for execution in person to a current client or future prospect with a seven-figure company 401(k) retirement plan account.

Years ago, an individual company 401(k) retirement plan participant would have had to include his or her company 401(k) retirement plan account in a financial plan. That inclusion would have added thousands of dollars to the leather-bound, multi-section financial plans that I remember paging through.

The best part of all this is that I delivered my investment advice for an annual fee that would make a robo-advisor take notice. In the beginning, my company 401(k) investment advisory fees were a mere 50 basis points annually for existing clients.

How does that Barbara Mandrell song go?  “I Was Country When Country Wasn’t Cool?” I can now say the same thing about being a 401(k) robo-advisor.

I have since learned that my company 401(k) investment advice niche does not fall into the passive investment advice commodity space. My existing clients are happy to pay for quality investment advice that is specific to their company 401(k) retirement plan account menu. The same can be said for their individualized stock market risk tolerance game plan.

Independent investment advisors are capable of developing the same individual company 401(k) retirement plan participant advice niche. In fact, it’s easier than ever to put together a client company 401(k) investment advice marketing plan.

Your existing clients are likely to be more than happy to expand their current level of investment advisory relationship with you and your firm. What better way to expand that relationship to include all the household company retirement plans in your client households?

Existing clients will likely respond positively to a 1% annually advisory fee on their company 401(k) retirement plan assets. They currently pay that much or more to blindly own mutual funds that have not outperformed their asset class benchmark in several years.

Most company 401(k) retirement plan providers offer some version of an online risk tolerance questionnaire. The robo-advisors do also. 

I bet your existing clients are willing to pay your for an in-person version of the same questionnaire applied specifically to their company 401(k) retirement plan account assets.

New Era

We are truly living in historic times in the independent investment advice business. 

The latest investment advice technology is at our fingertips. And we can charge annual investment advisory fees that compete with the least expensive robo-advisors.

The growth of my individual company 401(k) retirement plan investment advice niche has also incorporated economies of scale. For every copy of a company 401(k) retirement plan menu that I gather from a client, I also have a copy of the same set of investment management problems for every other employee at that same company.

My individual company 401(k) retirement plan investment advice clients are the greatest prospecting resource that I have. The recent stock and bond market volatility has been a blessing. I have enough referrals to begin as many new prospect conversations as I have time to follow up on.

Individual company 401(k) retirement plan participants will surely see the value in your investment advice offering.  After five-plus year of stock market gains, no one wants to fully participate in the next great stock market downturn.

There is a timely value of providing investment advice to your existing company 401(k) retirement plan participant clients. The only thing left to do is to develop your common sense and straightforward principal preservation story.

Use the current generation of investment advice tools. Keep your passion to provide investment advice that is in the best interest of your clients. Combine those two elements to include the company 401(k) retirement plan accounts of your best clients.

The current generation of robo-advisors is no competition for your client company 401(k) retirement plan assets.  I should know. I have been a 401(k) robo-advisor for years.


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