Imagine if the local bakery had a 401k? Let’s solve the 401k Coverage Gap and save the American middle class!

Sara Grillo

Today I have Brian Williams of Northshire Consulting and we’re going to be talking about how financial advisors can help improve 401k plan access to the American people who are working at small businesses who currently do not offer them. Let’s talk about fixing the 401k coverage gap, people! What if the local baker had a 401k plan? The neighborhood laundry? The local trucking company? Small business retirement plans are the way to save the American middle class from retirement failure!

Why are small business owners not offering 401k plans?

According to Brian, about 40% of workers don’t have access to one to begin with.

Why?

• It’s not a priority. The local bakery has 10 people working there, has turnover, has part time employees, and managing the day to day is the priority. The 401k plan is low down on the list.
• There is also the perception that they are too complicated, too expensive, and that the business believes that they are too small to have a 401k plan.
• Business owners don’t believe that works will actually do it.
• Business owners want to plough money back into the business instead of taking a risk on the market.

How 401k plans are important societally

If the 401k system was set up to accommodate the American middle class, it could make a major difference in people’s lives. It’s important to society that these mechanisms are in place.

• What about the people who aren’t financially that literate, who wouldn’t go to Charles Schwab and open a brokerage account?
• What about the truck driver who, between family and work, doesn’t have time to read NerdWallet?
• What about those who aren’t financially successful enough to where they are invited to the RIA firm steak dinners, increasing their scope of understanding?
• What about those who don’t have the money for a financial advisor?
• What about those who aren’t teachers qualifying for a pension?

What about those people???? Should we just throw them off to Social Security and hope for the best?

A 401(k) is the only mechanism where many Americans can get some financial literacy. According to Brian, half the country doesn’t even have more than $2,000 in their savings account. The idea they are going to go out and hire a $10,000 a year planner is ludicrous.

The workplace offers the one to many model and is the best way to get financial wellness and literacy to these people.

How advisors should approach small businesses about starting up a 401k plan

After you inspire the business owner, then comes the typical conversation about fees, funds, and fiduciary – not before. Instead of trying to pitch lower fund fees or compliance, strike them in the heart.

“Business owner, do you care about your employees?”

Yes.

“Do you want them to stay with you a long time?”

Yes.

“Do you think it would be the best thing for your business if Sheila who answers the phone of the trucking company, and who all your clients know by name, if she were still there in five months from now?”

Yes.

“Does Sheila have a family?”

Yes, she’s got two young kids.

“Does she know about 529 plans?”

Huh? I dunno.

“Does she know about 401k?”

I dunno, I’ve never had a conversation with her.

Where advisors miss opportunities with small businesses

This is about motivating the employer to want to participate in the financial wellness of their employees. That would be the conversation not the typical financial advisor pitch about fund expense ratios. That’s not it. Show them ways they aren’t caring as much about their people as they possible could. This is how Brian approaches the conversation about small business retirement plans.

• How do you think lethargic or non-motivated employees affect your bottom line?
• Ask them who the plan is for; them or their employees.
• How expensive is turnover for your business?
• How much time do your employees spend thinking about money issues?

Especially at a small business, it’s a lot harder for people to put in half-effort, to look for another job, and to leave if they feel that the small business owner cares about them.

Bring the spirit of entrepreneurship back to the conversation. If you want to be a financial advisor for 401k plans, do it for the right reasons; not just to get at the business owner’s assets. You have to have a passion for working with all the employees because if you are just laser-focused on the CEO and have no concern for Tony the secretary who is out front putting away $20k a year, that is not going to be a win for anybody. It’s just not a good scenario; you really should have a passion to help everyone in that company’s workforce.

Brian says that what many advisors miss though is the automation. You don’t want to have the employer have to manually download payroll data every week; use technology to streamline the process and make it easier.

American middle class needs more 401k plans

Financial advisors have an amazing opportunity to help America.

• Not have as stressful a Christmas
• Not fight with their spouses over bills
• To help them to get up in the morning and feel as if they are building something for their family rather than just getting a paycheck that is about to vanish
• To feel they are more in control of life for their families
• To seek people to acquire more financial literacy because you inspired them
• To help people to seek more success financially instead of just clocking in and clocking out, to behave differently

Solving the 401k coverage gap

Brian wonders:

What if ever advisors took every Friday afternoon and went to visit a small business in a 10 mile radius of their business?

Instead of writing a check to your local charity, donate some time. Even if your goal is to break even, maybe that is your contribution to your community instead of just writing a check. If you give a business owner five good things to do for their business, you never know how they could reciprocate back. Moreover you never know what you can learn from sitting down with somebody, especially a business owner who has been through some stuff. If anything you could make a new friend.

And that’s it for the show!

Sara’s upshot

Thanks for reading my blog about how to tell if a life insurance pitch is bad.

• I am an outsourced CMO for companies who need regular, full service marketing – blogging, social media posts, newsletters, etc.
• I am an hourly consultant for those who just need one-time or recurring guidance
• People hire me as a ghostwriter to write content for a project fee
• I have a social media training program
• I have a book about what to say on LinkedIn messenger

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