Let’s face it. 401(k) plans are complicated. There are a lot of rules and regulations that are hard to understand, plus they constantly change. It’s easy to make administrative mistakes. Plan sponsors need a lot of help to first, design their plan to meet their company’s goals and objectives, and then to ensure their plan is administered correctly and meets all the compliance requirements.
Retirement plan advisors support plan sponsors in many of these decisions. They’re also a key link between plan sponsors and third-party administrators (TPAs) and other plan providers, providers who are necessary to the smooth running of the plan.
Retirement plan advisors are not the same as personal financial advisors. A retirement plan advisor specializes in working with qualified retirement plans such as 401(k)s. They help answer employer questions and guide them to the right type of plan for them and their employees. They:
- Educate and inform employers about:
- How 401(k) plans work
- Why they should adopt a 401(k) plan
- Understanding the complexities of a 401(k) plan
- Service providers they will need to help them with their plan
- Consult with plan sponsors on the best design features of a 401(k) so they can maximize their tax savings and so can their employees
- Help in developing an Investment Policy Statement specifying the sponsor’s investment objectives and goals and the strategies for meeting those goals
- Add value to the sponsor by helping educate participants about the plan to:
- Improve employee outcomes
- Improve employee satisfaction with the plan
Advisors also often act as an investment manager in selecting and watching the plan’s investments and even serve as a 3(21) or 3(38) fiduciary to the plan.
Employers value an advisor who can be their 401(k) plan partner.
So do TPAs.
TPA – an Advisor’s Best Friend
TPAs and advisors are natural best friends. They have complimentary skills and a shared vision of service to their employer clients and employees. They work together to help those clients achieve their company’s goals and their and their employees’ savings goals. A good TPA can also help the advisor’s business succeed.
TPAs specialize in retirement plan design and administration and can help advisors in these areas. Every client is different, which means some customization in plan design is necessary. Administration is an important part of having a 401(k) plan, albeit maybe not the most glamorous part. A TPA helps the plan sponsor with plan reporting, compliance, and plan documents. A TPA handles day-to-day plan operations and administration with such items as employee eligibility, calculating matching contributions, and preparing the Form 5500.
Advisors, TPAs, and Technology
Over 50 million Americans don’t have access to a retirement plan, most of them working for a small business (one with fewer than 100 employees) that doesn’t sponsor a 401(k) plan due to complexity and cost factors. There are more than 30 million small businesses in the U.S., but only a total of 600,000 401(k) plans. The retirement industry is working to close that gap, with many TPAs and recordkeepers using technology to bring down the cost of a 401(k) plan.
The use of technology has accelerated since the pandemic and has changed the way a lot of companies including retirement ones, work. And this includes 85% of advisors, who, according to Vestwell’s “2021 Retirement Industry Trends Report,” plan to place a greater emphasis on technology to run their business than they did prior to the pandemic.
That’s good, because advisors who are working or interested in working with small businesses need to find low-cost efficient 401(k) solutions with a good fintech TPA. But to be a good partner with a fintech TPA, they need to be comfortable with a high level of technology.
For technology drives many of the tools needed to make low-cost solutions possible, of which automation is a key part. Fintech TPAs use advanced technology to automate many 401(k) functions which are essential to lowering the costs.
Fintech TPAs to the Rescue
Small business plan sponsors are looking for advisors to help guide them with investment menus and plan design, and to help employee engagement and greater financial well-being – all at a reasonable cost.
This is where a good retirement plan advisor can shine, especially if they partner with an excellent fintech TPA who provides bundled services combined with great technology and automation.
Just as Alaska Klondike Gold Rush prospectors solved the challenge of getting into the interior of Alaska in wintertime by ascending Canada’s Chilkoot Pass, a good fintech 401(k) company solves many of the challenges that deter small businesses from adopting a 401(k) plan. They do it through advanced technology and automation, areas that have exploded since the COVID-19 pandemic hit in 2020.
- Cost. Fintech companies often have substantially lower fees than conglomerates. And they’re joining with more established recordkeeping and administration companies who work with the small business 401(k) market to present ever lower-cost solutions for their plans. Modernization and automation can help plan sponsors speed up processes, reduce turnaround time, and improve their Return on Investment (ROI).
- Staff assistance. Administrative help comes in the form of improvements in payroll integration and connectivity; automated benefits reconciliation; greater ease with non-discrimination testing and other compliance tasks through automation; and help with plan designs which are often less complicated than those for large companies.
- Administrative complexity. Many of the newer fintech companies use their own proprietary software technology for their recordkeeping purposes, and some take on 3(16), 3(21), or even 3(38) fiduciary responsibilities typically borne by the plan sponsor, TPA, or third-party fiduciary provider. In addition, their systems can automate repetitive tasks, free up administrative staff time, set up alerts and reminders for compliance deadlines, and build dashboards for participants to use for greater access to their accounts.
This makes a lot of sense. But who to choose?
401GO Fintech Solutions
401GO is a fintech company that was created to offer improved access to work-sponsored retirement plans by helping small businesses implement 401(k) plans for their employees.
They built a fully integrated and intuitive proprietary system that does the work of 3-4 providers and saves employers money, time, and hassle through efficiency and automation. And in so doing, improve outcomes for workers who are often ignored or underserved by traditional providers.
401GO believes in being an extension of an advisor, not their replacement. So, they have established a special partnership program just for advisors. Once an advisor becomes a partner, they have access to a special portal from which they can access their clients’ information, run reports, and even set up a plan on a client’s behalf.
Interested? Team up with 401GO and discover how fintech solutions are a boon for your business.