6 Reality Checks for Wannabe 401(k) Plan Advisors

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While there are many reasons why wealth management professionals may think getting into the 401(k) plan business is a good idea, there are also many reasons for caution, warns Jarrod Sandra, founder and owner of Chisolm Wealth Management.

Sandra would know, having spent nearly 10 years working with 401(k) plan sponsors and overseeing a team of relationship managers at Fidelity, often described as the “800-pound gorilla” of the defined contribution retirement plan recordkeeping and advisory industry.

After an early-career stint in the independent RIA space starting in 2006, Sandra joined Fidelity Investments in 2013 to help companies administer their retirement plans. He left as one of the firm’s youngest vice presidents, overseeing roughly $8 billion of retirement plan assets across a team of relationship managers.

Last year, Sandra started Chisholm Wealth Management with the goal of offering what he calls “truly independent advice and the highest level of service to clients.” Today, he specializes in two specific areas: helping companies with their 401(k) plans and helping business owners and families with their personal financial plans.

According to Sandra, working with retirement plans can confer great benefits to any RIA firm with the right approach. The assets in the plan tend to be sticky, and working with any given plan tends to generate substantial wealth planning opportunities stemming coming from rollovers and by serving the ancillary needs of C-suite executives.

However, as Sandra emphasized in a recent call with ThinkAdvisor, there are many ways that financial advisors could make costly mistakes while entering the defined contribution plan market. For starters, there are stringent, ever-evolving fiduciary standards applying to workplace financial advice under the Employee Retirement Income Security Act (ERISA). What’s more, the lead times for “closing a sale” can be far longer than a novice plan advisor may expect — in the realm of two to three years in many cases.

Ultimately, all financial advisors can benefit from considering the role of plan-focused services in their practice, but getting the effort right will take a lot of sustained effort and commitment.

See the slideshow for a rundown of Sandra’s top tips and suggestions regarding the many misconceptions wealth managers hold with respect to defined contribution plans — and how to get the entrance into the wide world of 401(k) plans right.

(Pictured: Jarrod Sandra, Chisholm Wealth Management)