5 Advisors Warn: Don't Dabble in 401(k) Plans!
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Amir Noor, director of financial planning at United Financial Planning Group, has what he says can be called a pretty common story with respect to how he started working with 401(k) plans.
Earlier in his career, Noor was working as a junior advisor for a commission-based firm in New Jersey, and he says the experience showed him that retirement plans are a different animal, one that is often poorly served by the traditional advisory industry.
“They were mostly working with small-business owners with 10 employees and under, with many of them being high-income doctors,” Noor recalls. “So, their main advisors were going in, selling a 401(k) plan and usually a pension as well, and then the lead advisor moved onto the next client.”
Noor says that initial sale, from the client’s perspective, was often “predicated on the big, fat tax deduction of having a qualified plan.” And the main advisors were incentivized to sell the plans because they were getting additional assets under management and usually selling a significant life insurance policy to the business-owner client as well.
“My job was to do all the grunt work and actually manage, set up, and maintain the qualified plans, as well as do employee enrollment meetings,” Noor explains. “By the time I left, I was managing 50 different plans.”
Noor says he continues to serve (and enjoys serving) retirement plan clients now that he is in independent practice. But he is passionate about taking a better approach, one that prioritizes planning and represents a more consultative relationship with the plan sponsor and participants.
Asked for his advice for fellow industry professionals who are contemplating moving into this area, Noor has one main point of guidance: “Don’t dabble!”
“There’s a lot of liability for you and your client,” he warns. “Either choose to be an expert in it, or refer it out.”
See the gallery for additional insights from Noor and a handful of other advisors who have made it their business to efficiently and effectively serve defined contribution retirement plans. Like Noor, they all share the perspective that dabbling in 401(k) plans is not worth the hassle — either for advisors or clients — but a well-run retirement plan advisory practice can amplify a firm’s reach as well as its bottom line.
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