The allure of collateral sales from a 401(k) book of business is a longstanding enticement to draw successful retail FAs into the world of employer-based retirement plans. Convert business owners and company executives into retail wealth management clients goes the argument. Harvest the Rollover IRAs. Sell group insurance or other business financial products to your 401(k) plan sponsors. The opportunities abound…
What, exactly, is the potential and to what extent are advisors leveraging their 401(k) plan sponsors and participants to generate business for other practice areas? How does that differ by type of advisor?
It turns out that the average 401(k) advisor produces about 42¢ of collateral practice revenue for every $1.00 of 401(k) revenue. Predictably, light advisors (deriving less than 20% of their total practice revenue from 401(k) so by definition having other practice priorities) generate by far the highest percentage of collateral revenue from their (smallish) 401(k) business. Heavy advisors, in contrast, very much focused on selling and servicing 401(k) plans, generate only about 14¢ of collateral revenue for each $1.00 of revenue from their (much larger) book of 401(k) business.
Share of 401(k) Income
Average for All Advisors: 32%
First, I just need to understand what percentage of your total professional income, if any, did you derive from fees and commissions on standard 401(k) plans over the past 12 months?
Cross-Sell From 401(k) Practice
By 401(k) Share of Income
| |
Average 401(k) Proportion of Income (Q1) |
Average 401(k) Spin-off Proportion of Income |
Spin-Off Revenue for each $1 of 401(k) Revenue |
| All Advisors |
32.0% |
13.3% |
$0.42 |
| Lights |
6.7% |
12.2% |
$1.82 |
| Mediums |
31.7% |
16.7% |
$0.53 |
| Heavies |
86.2% |
12.0% |
$0.14 |
About the Research
These findings are based on telephone interviews with a representative crosssection of 628 advisors deriving income from 401(k) plans conducted in waves between June, 2010 and May, 2011.
About Brightwork Partners, LLC
Delivering both multi-client and custom studies, Brightwork is a research-based consulting firm with a special focus on investment, product and distribution issues in the retirement services industry; www.brightworkpartners.com .
For more information: Merl W. Baker or Ronald L. Bush, 203.487.2000; mbaker@brightworkpartners.com , rbush@brightworkpartners.com