First Financial Coach

Retirement plans are pretty popular as investment vehicles.  Almost anyone who has ever worked for a mid to large size company has heard of a 401(k) plan. The plans tend to be generous and offer “free” money to participants, and employees have the ability to sock away a nice chunk of their own money as a nest egg for retirement. 

Niche Equals Success

My financial advisor clients have learned by working with me that targeting anyone and everyone about absolutely any issue is really the same as targeting no one about absolutely nothing. Many of my most successful financial advisors clients have selected 401(k)’s as one of their niche markets to help them stand out from the crowd of advisors who have no area of expertise.

The 401(k) market is a profitable niche for financial advisors for many reasons: 

Businesses that provide a 401k plans to their employees tend to be larger and more successful than small business owners with lower revenue and profitability, and these medium sized businesses tend to have greater longevity.      Providing the investment choices in the plan opens a market to the advisor with regular monthly contributions to the plan that increase assets under management over time. Becoming an expert at specific company plan design can help you garner rollovers from 401(k) participants and their co-workers. The business owners themselves make great clients because they are profitable and may have personal investing needs outside their business. The business owner may also need assistance with investing the profits of the business.

The key to targeting this market is to invest time and energy into crafting a strategy that sets you up as the go to person for any company interested in either moving or starting a plan. You can do that by:

 Target plans with assets between million and million. This is a niche that larger mutual fund companies would rather not target due to profitability.

Become an expert in 401(k) plans – read all that you can about the current regulations, the options offered by your company, mutual fund, or broker dealer, and reading books and publications that deal with the industry.

Find out from your own Ideal Clients which companies you would like to target and then become an expert in their plan design. Ask for help from your Ideal Clients and get introductions to plan participants who are within five years of retirement.  Position yourself as the advisor they should approach when needed. Learn the specialized distribution options offered by specific plans and give seminars to small groups of friends referred to you by Ideal Clients. Call the person in this company who signs the 5500 form and ask if they are looking to send the plan out to bid. 

The 401(k) market can be very lucrative for the independent financial advisor and can open many doors to other opportunities.  Get on the niche bandwagon and take your practice to the next level.

Copyright© 2009 |Suzanne Muusers

The New York Stock Exchange has always been seen as a trusted investment institution where people become rich.  The Stock Market has produced many millionaires who followed the right stock advice and invested in the right stocks at the right time.

Many average Americans have followed suit and put their faith in the stock exchange as a trusted wealth producing institution.  They are happy to include their S & P Fortune 500 stock or two in their 401K or retirement plan.

Choosing the right investment often times is left to the professional financial planner or broker’s investment research and 401K advice by trusting average Americans. The planner tries to diversify the investments.  Sometimes they include gold or other precious metals because they know the gold price will rise during difficult economic times such as a recession.

The old adage “It takes money to make money” is true on Wall Street.  The more money one has to invest, the better stock portfolio can be created. The average American has to count on their 401K portfolio that the company offers.  Many long term employees bought shares in their company stock year after year.

In 2001 the average Americans learned a hard lesson with the highly touted Fortune 500 Enron stock.  Whether you were an employee of the company or whether you or your investment consultant decided to include Enron as one of your investment opportunities, the collapse of the Enron Corporation destroyed these investors and their retirement planning dreams.

A friend of mine confided in me that he really took a hit with the Enron collapse, and he has to keep working beyond his planned retirement date. The Enron Employees lost everything…..their job, their 401K, and all their stock holdings.

Due to the greed and manipulation by the corporate heads of the company, the Enron collapse had an estimated loss of $618 million and eliminated $1.2 billion in shareholder equity. This should have been a warning to all investors.

WARNING: Greed and manipulation is a part of corporate America!  We may never know how many individual lives were affected by the Enron collapse, just as we never know how many average American families’ lives have permanently been altered by the abuses of corporate America in the housing and banking crisis of 2007-2008.

In a recent conversation with my brother he shared with me that his company’s stock shrunk to $0.97 per share down from a high of $57.00 (December 2006). His company’s stock portfolio was going to be the means by which he would pay for his three boys to go to college.  But all he has left is a penny stock.  I didn’t need to ask how many shares he had; it wouldn’t make a difference.

 In 2009 the same corporate greed of the last two years reaches far beyond Houston, Texas, where Enron was located.  Across America, from California to New York average American families who had pinned their hopes and dreams for the future on their stock and 401K investments have lost everything including their jobs and their homes. By now 8.5 million Americans have lost their jobs.

“Who do you trust?” Where can the average American go to invest in his/her future? Are we ever again able to believe corporate America, Wall Street Brokers, the New York Stock Exchange, Banks, Financial Planners to direct us to a place where one can locate a high yield safe investment?  Does anyone have any other investment ideas as where to put their money?

Will my brother’s stock ever reclaim the $57.00 value it once had? Can the average American trust themselves with an investment program of their own?  Are they willing to do their own investing?  Are banks and their 3% return on CD investments of $10,000 for 30 months the answer?  Does the average American have that kind of cash flow to give to Banks?

What’s the difference between a 3% return on $15,000 investment and a $15,000 return on a $3 investment?  The first answer is cash flow.  Most Americans may be able to afford the three dollars, but definitely not the fifteen thousand, and especially not for thirty months!

A lot of people are against gambling for a lot of different reasons. But the stories of Enron 2001, and corporate America 2007-2008, whom we thought we could trust have gambled away our money with reckless abandon with unregulated hedge funds for their own profit taking.

Which is worse — to risk your own money or to give your money to someone else who could possibly gamble it away?  What is the difference of investing your money in a low risk high yield Pick 4 investment—win or lose, or give your money to a stock broker who could gamble it away?

Every successful investment system is based on KNOWLEDGE & STRATEGY. If an investor of any kind gains this knowledge and learns the strategies, they can be SUCCESSFUL, too.  But does the average American trust him or herself enough to handle his or her own investing?  Or are we stuck with Corporate America?

Dr. Benjamin Spock once said: “Trust yourself. You know more than you think you know.”

The recent Pension Protection Act offers good news for the non-spouse beneficiary of a 401(k). It is now possible to arrange a trustee-to-trustee transfer of an inherited 401(k) to an inherited IRA. This is great news for the consumer, and represents a significant change from the old law.

The new law basically offers inherited 401(k)s the same tax treatment as inherited IRAs. The 401(k) owner should now make the decision to rollover or not to rollover based on investment reasons, not tax reasons.

401(k) Rollover Distribution Background

Under the old tax laws, leaving money in a 401(k) to an heir other than your spouse carried the potential for a tax nightmare. Rules governing 401(k)s vary according to a particular company’s plan documents. Often plan documents stipulated that if you left your 401(k) to an heir, other than your spouse, he or she would have to take distribution of the inherited 401(k) and pay income taxes on the entire distribution the year after the death of the original owner.

On a $1M inherited 401(k) this would mean paying $350,000 in taxes immediately, and the remaining $650,000 would be outside of the tax-deferred environment. Inherited IRAs did not have that limitation. An heir with a $1M inherited IRA could take the necessary minimum required distributions and maintain the money in the tax-deferred environment—stretching the IRA’s life. And the “stretch IRA” would continue to grow tax-deferred, and could be worth $1M or more over time for the non-spouse heir.

Therefore, the best tax advice used to be “roll the money into an IRA.”

The Roll The Money Into An IRA Problem

The reason people resisted the advice and rolling the 401(k) into an IRA is that many of these old 401(k) plans have a great fixed income fund as one of their components. Many of these old fixed income funds are paying returns in excess of today’s fixed income or bond funds and many of the old timers continue to have money in these fixed income funds of their 401(k) 10 years or more after they retire.

The old law forced a choice between offering the non-spouse heir the tax benefits of the stretch IRA and the owner’s interest in keeping the money in the better-than-average fixed income fund in the 401(k). Maybe some hotshot investor could show me a much better investment than these old funds, but with my experience, I would rather have money in many of these fixed income funds (including TIAA for the 403(b) crowd) than other bond or fixed income funds.

The New Law and My Solution: Make the Best of Both Options

I am still in favor of managed money if you find a low fee, ethical advisor with a great track record. Now, however, I would likely recommend retaining the fixed income portion of the portfolio in the 401(k). The stock and growth portion of the 401(k) could be rolled into an IRA to take advantage of the broader spectrum of investment options offered through IRAs. In either case the non-spouse heir will not have to worry about the tax consequences if he or she is lucky enough to inherit either the IRA or the 401(k).

Retirement plans are pretty popular as investment vehicles.  Almost anyone who has ever worked for a mid to large size company has heard of a 401(k) plan. The plans tend to be generous and offer “free” money to participants, and employees have the ability to sock away a nice chunk of their own money as a nest egg for retirement. 

Niche Equals Success

My financial advisor clients have learned by working with me that targeting anyone and everyone about absolutely any issue is really the same as targeting no one about absolutely nothing. Many of my most successful financial advisors clients have selected 401(k)’s as one of their niche markets to help them stand out from the crowd of advisors who have no area of expertise.

The 401(k) market is a profitable niche for financial advisors for many reasons: 

Businesses that provide a 401k plans to their employees tend to be larger and more successful than small business owners with lower revenue and profitability, and these medium sized businesses tend to have greater longevity.      Providing the investment choices in the plan opens a market to the advisor with regular monthly contributions to the plan that increase assets under management over time. Becoming an expert at specific company plan design can help you garner rollovers from 401(k) participants and their co-workers. The business owners themselves make great clients because they are profitable and may have personal investing needs outside their business. The business owner may also need assistance with investing the profits of the business.

The key to targeting this market is to invest time and energy into crafting a strategy that sets you up as the go to person for any company interested in either moving or starting a plan. You can do that by:

 Target plans with assets between $5 million and $50 million. This is a niche that larger mutual fund companies would rather not target due to profitability.

Become an expert in 401(k) plans – read all that you can about the current regulations, the options offered by your company, mutual fund, or broker dealer, and reading books and publications that deal with the industry.

Find out from your own Ideal Clients which companies you would like to target and then become an expert in their plan design. Ask for help from your Ideal Clients and get introductions to plan participants who are within five years of retirement.  Position yourself as the advisor they should approach when needed. Learn the specialized distribution options offered by specific plans and give seminars to small groups of friends referred to you by Ideal Clients. Call the person in this company who signs the 5500 form and ask if they are looking to send the plan out to bid. 

The 401(k) market can be very lucrative for the independent financial advisor and can open many doors to other opportunities.  Get on the niche bandwagon and take your practice to the next level.

Copyright© 2009 |Suzanne Muusers