4 Steps to Grow Your Advisory Business With Secure 2.0
If you’re new to employer-sponsored retirement plans, you don’t have to become an expert overnight, add to your payroll or assume outsize risk. Here are four steps to get started:
1. Encourage Investment in a Better Retirement Vehicle
Separate from Secure 2.0, 18 states have passed laws mandating that employers offer IRAs or other retirement solutions, and most states are considering similar legislation. However, non-qualified plans will be ineligible for tax credits under Secure 2.0 and won’t provide the same benefits.
Even if businesses have already started a state-mandated IRA, they can open a 401(k) and qualify for federal tax credits. Financial advisors with business-owner clients in these states should share the benefits of opening a qualified 401(k) plan, which, in addition to tax credits, offers more attractive features, such as allowing businesses to provide employer-match or profit-sharing contributions.
2. Lean on Non-Competitive Partners
Some advisors have avoided offering retirement plans due to perceived complexities, unknown costs and lack of bandwidth. But startup tax credits can reduce some of the growing pains. As advisors build their retirement business, they should actively consult with their custodian, who can direct them to recordkeepers and third-party administrators to help navigate the onboarding process.
These partners can handle everything from plan compliance to administration, technology, and sales and marketing support. Just ensure that whomever you partner with isn’t directly competing with you and actively targeting the same clients that you are.
3. Tap Your Compliance Team
Involve your compliance team in all discussions around the fee structure, fiduciary status and investment selection process. It is important to understand your fiduciary status and how it might affect your business.
4. Stay Closely Aligned With Your Partners
In the coming years, several important features of Secure 2.0 are becoming available. These include mandatory automatic enrollment for new plans, expanded distribution options, Roth employer contributions, and the addition of Roth SEP and Roth Simple IRAs. The IRS recently issued guidance around many of these new features, and the industry awaits additional clarification around Roth SEP and Roth Simple IRAs.
Amid these ongoing developments, advisors should continue communicating these changes to prospective and current retirement plan clients to ensure that they are taking advantage of all available options. A good partner will keep you informed as new information is released.
Conclusion
Secure 2.0 offers financial advisors an opportunity to offset expenses associated with building a new revenue channel while also strengthening client relationships. Do you want to leave the ball in a competitor’s court?
Small businesses are under pressure to offer retirement plans; if you can’t meet their needs, you are opening yourself up to the risk that someone else could come in and take that entire relationship. Proactively help your client solve a problem — one that the client might not even be aware of — and create stickiness in the relationship, making it more likely that you’ll work together for years to come.
Amy Morris is senior vice president and head of Offer Strategy & Enablement at Axos Advisor Services, an RIA custodian.
