401k prospecting kit - mesgadomesgado.com/wp-content/uploads/2016/05/hcv-prospecting-kit.pdf · 5....

401k

Prospecting

Kit

Horizon Capital Ventures, LLC Proprietary and Confidential Investment Advisor Use Only

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Dear [name],

There’s a dramatic shift under way toward greater transparency in fees in the 401(k) business,

and your plan’s financial advisor/professional should be out in front of this issue, providing you

with:

Perspectives on the mechanics of fee structures, the various components of plan fees

and changes in the regulatory environment (including Form 5500 requirements and

potential legislative developments).

Insight into how to identify the full range of services provided and the fees charged for

such services.

Assistance in establishing a process for you to assess the fees charged to your plan and

to document your findings.

As a financial advisor/professional that provides companies like yours with retirement plan

support services, I pride myself in understanding the issues surrounding fee transparency and

helping clients develop a systematic approach to address them.

[Personalize example for your type of contact.]

Business Owner/CEO type: As the fiduciary for your company’s plan, you have a responsibility for ensuring that you have an understanding of legislative developments and insight on what you and your employees should expect from a service perspective.

Treasurer/CFO type: As someone who is close to the administration of the plan, I can help you gain a better

understanding of plan costs and fees and the impact to your company’s bottom line.

Human Resources: Your focus is on offering support and resources to your company’s employees. I can help in making sure that you and your employees are receiving the kinds of service they should expect based on the fees you pay.


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[End personalization.]

Are you fully satisfied with your current financial advisor/professional’s support for you and the

plan in this important area? If not, I would appreciate the opportunity to have a brief phone

conversation with you to learn more about your plan and discuss how I may be able to address

current gaps in process or service.

I will call shortly, and look forward to exploring how I may be able to help.

Best regards,

[Signature]

[Financial Advisor/Professional]

[Contact Information][Firm Information]

Contact Please contact Greg Moerchen at either (260) 615-7601 or [email protected] for questions.

mailto:[email protected]


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Review the HCV ERISA 3(38) training module to understand the differences between a 3(38) and 3(21) fiduciary. You will need to understand and communicate the fiduciary status that takes place when an independent manager acts as an ERISA 3(38) Investment Manager for the plan and participants.

Call Script “Hi, I’m [name] from [name of firm], I specialize in working with 401(k) plans. Recently I sent you a letter about fiduciary status. I am sure you have had many discussions about fiduciary issues, but my letter highlighted an area many 401(k) Plan Sponsors (or insert their role: HR Director’s CFO’s, etc.) have found shocking! [Ask if they have the letter or you can email it to them. If they do have the letter, ask them if there were any specific items they would like to discuss first.]

[Whether or not they have it, review the beginning of the letter with them as follows:] Since we work with a firm that specializes in this area, I would like to go over a few items to make sure you are getting all you can from your plan.

What kind of fiduciary outsourcing are you practicing in your 401(k) plan? Is it what you have actually chosen? Do you have a 3(38) Investment Manager or a 3(21) fiduciary? Or are you serving as the fiduciary over the investments in the plan?

What many of my Plan Sponsors [or insert their role: (HR Director’s CFO’s, etc.)] have found shocking is: In the 408(b) (2) Disclosure, the financial advisor/professional only needs to disclose if they are a fiduciary. But what if they are not? They do not have to tell you that. So how do you know who all the fiduciaries are? How and where are they identified? There can be a lot of confusion about who the fiduciaries really are. And as I spoke about earlier, someone might not be identified as a fiduciary, but in practice actually is. As you probably recall, the reasons this is dangerous is that fiduciaries are required to operate as a prudent expert would. And they even have personal liability for their decisions.

This is clearly NOT the time to be unsure! [OR this is clearly the time to be sure! — your preference.]

So how did your current financial advisor/professional handle being named a fiduciary in the 408(b)(2)? [Depending upon the answer and knowledge level of your prospect, you could suggest a meeting, or continue to question them as follows:]

As I mentioned, understanding fiduciary types can be complex, I would be happy to meet with you to discuss: What are the pros and cons of having a 3(38) or 3(21) fiduciary? How risky is it to try to

Before the Call

401(k) Prospecting Kit


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maintain all the fiduciary duties within your company? [If needed, continue with the information/questions based on client type from the letter.]

My service includes making sure you know what you are getting, as well as the pros and cons of other approaches.

As I discussed in my letter, I would like to help you make sure. • Of your fiduciary options. • Of what is best for you and your plan. • That you are getting what you pay for.

I take great pride in helping companies offer the most effective 401(k) plans. So, why don’t we try to meet next week to discuss this further”? [Prepare an agenda based on opportunity areas discovered and email it to them in advance, include appropriate materials (as indicated above)].

[If client is not open to setting up a meeting at this time, ask for their permission to contact them again in three months just to check in. Also, if you have an email distribution list, ask if you can add them, and send them more information periodically as discussed in the HCV Prospecting training module.]

Contact Please contact Greg Moerchen at either (260) 615-7601 or [email protected] questions.



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Purpose: Gather Data for Fee Benchmarking and Investment Performance Analysis

Discovery Questions

1. Looking back, what do you remember as the reason you initially set-‐up the retirement plan?

2. What are your overall goals for the plan?

a. Protection from fiduciary liability.

b. Improve participant outcomes.

c. Reduce costs.

d. Improve service.

3. Of these goals, what are you particularly happy with?

4. What did you hope the plan would do that it has not?

5. Do you think the plan is designed to meet both the needs of the company and the employees?

6. What do you think your employees think about the retirement plan?

7. Do you regularly survey participants to determine what issues they are having trouble with?

8. Do you currently have portfolios that actively get you out of the market if another 2008 happens? 9. Who are all of the decision-‐makers for the plan?

Review Sample Reports

1. Investment Monitoring Report

2. Fee Benchmark

3. Plan Comparison

Information Gathering

1. Document Checklist

2. Fee Assessment

3. Request the latest 408(b)(2) and 404(a)(5) documents

a. Recordkeeping and administration fees

b. Investment expenses

c. Fiduciary fees

d. Advisory fees

e. Trustee fees

Forms for Plan Sponsor to Complete

1. Common Fiduciary Concerns

2. Financial Professional Evaluation

Leave Folder Behind (contents)

1. Advisor/Firm custom marketing collateral

2. Sample Investment Monitoring Report


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3. Sample Fee Benchmark 4. Sample Plan Comparison

5. Independent ERISA 3(38) Investment management Product Sheet

6. Document Checklist

7. Summary of Services Offered

Next Steps

1. Collect documents and information during the meeting or schedule a date/time to pick-‐up the information.

2. Schedule second meeting to present findings 7-‐10 days out.

3. Ask to include all decision-‐makers in next meeting.

4. Have Plan Sponsor complete forms for next meeting.

Preparation for Second Meeting

1. Send documents and information to HCV.

2. Complete the Customized Service Summary with HCV.

3. Build folder.

4. Create agenda.

5. Collect latest investment information/fact sheets on sub-‐advisor portfolios.

6. Collect reports and information from independent ERISA 3(38) Manager:

a. Investment Monitoring Report

b. Fee Benchmark

c. Plan Comparison

d. Provider recordkeeping and administration proposal.

e. ERISA 3(38) fact sheet.

f. Investment Policy Statement.

g. Retirement Plan Investment Management Agreement.

h. Risk tolerance questionnaire for managed accounts.

i. ADV Part II.

j. Applicable investment agreements.

k. Customized service summary and planning calendar.

l. Education policy.

m. Proposed education services.

n. Advisor additional education addendum.

o. Service commitment letter


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The questions below will help your financial professional to understand your overall satisfaction with your current retirement plan and help to uncover any areas for improvement.

1. Have plan participants been provided with a summary plan description, summaries of

any material modifications of the plan, and annual summary financial reports or annual

pension funding reports?

Comments:

Yes ☐

No ☐

2. Are copies of the plan documents maintained at the principal office of the plan

administrator for examination by participants and beneficiaries?

Comments:

☐

☐

3. Are written participant inquiries for copies of plan documents and information

responded to within 30 days?

Comments:

☐

☐

4. Does the plan include written procedures for making benefit claims and appealing

denied claims, and are these procedures being followed?

Comments:

☐

☐

5. Is the plan covered by fidelity bonds protecting the plan against losses due to fraud or

dishonesty by persons who handle plan funds or other property?

Comments:

☐

☐

6. Are the plan’s investments diversified so as to minimize the risk of large losses?

Comments: ☐ ☐

7. If the plan permits participants to select the investments in their plan accounts, has the

plan provided them with enough information to make informed decisions?

Comments:

☐

☐

8. Has a plan official determined that the investments are prudent and solely in the interest

of the plan’s participants and beneficiaries, and evaluated the risks associated with plan

investments before making the investments?

Comments:

☐

☐

9. Does the employer or other plan sponsor send participant contributions to the plan on a

timely basis?

Comments:

☐

☐

10. Did the plan pay participant benefits on time and in the correct amounts?

Comments: ☐ ☐


Check Yes or No to each question


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11. Did the plan give participants and beneficiaries 30 days advance notice before imposing a

“blackout period” of at least 3 consecutive business days during which participants or

beneficiaries of a 401(k) or other individual account pension plan were unable to change

their plan investments, obtain loans from the plan or obtain distributions from the plan?

Comments:

☐

☐

12. Has the plan engaged in any financial transactions with persons related to the plan or

any plan official? For example, has the plan made a loan to or participated in an

investment with the employer?

Comments:

☐

☐

13. Has any plan official used the assets of the plan for his/her own interest?

Comments: ☐ ☐

14. Have plan assets been used to pay expenses that were not authorized in the plan

documents, were not necessary to the proper administration of the plan, or were more

than reasonable in amount?

Comments:

☐

☐

15. Do you have an investment policy statement and is it being followed?

Comments: ☐ ☐

16. Have you designated an “Investment Committee” that meets on a regular basis?

Comments: ☐ ☐

17. Do you prepare and save the minutes of Investment Committee?

Comments: ☐ ☐

18. Does the Investment Committee receive the guidance of an un-‐‐biased qualified

professional or investment advisor?

Comments:

☐

☐

19. Is the current investment advisor receiving compensation for managing your plan

personally related to or associated with a plan fiduciary or investment committee

decision maker that could be construed as a conflict of interest?

Comment:

☐

☐

20. Are all the plan fiduciaries aware they are fiduciaries and are they aware of the meaning, responsibilities and extent of their potential personal liability?

Comments:

☐

☐

21. Have all fiduciaries signed a fiduciary agreement?

Comments: ☐ ☐

22. Do you know all of your plan costs and how they are allocated between the company and

the participants, including 12b-a fees, revenue sharing and asset management fees?

Comments:

☐

☐

23. What is the date of your last 408(b)(2) report?

Comments: ☐ ☐


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24. Are participants in your plan supplied with updated and accurate plan information

necessary to help them make informed investment decisions?

Comments:

☐

☐

25. Is your current provider and/or investment advisor proactive in their roles?

Comments: ☐ ☐

26. Do the investment options in your plan continue to represent the asset classes for which

they were originally chosen?

Comments:

☐

☐

27. Do your investment options include “model portfolios” or “lifestyle” type fund choices?

Comments: ☐ ☐

28. Does your advisor work only at the plan level or at both the plan and employee levels?

Comments: ☐ ☐

29. Is there a system in place for participants who retire or leave the company to assist with

rolling over their plan assets to a new investment vehicle?

Comments:

☐

☐

30. Are you aware of the opportunities that the Pension Protection Act offers to

substantially improve your plan such as auto enrollment or Safe Harbor protection?

Comments:

☐

☐

31. Is your plan 404(c) compliant?

Comments: ☐ ☐

32. If you are 404 (c) compliant, is your plan currently covered by a fidelity bond?

Comments: ☐ ☐

33. Are you aware of the schedule to deposit participants’ contributions in the plan and have

you made sure it complies with the law?

Comments:

☐

☐

34. If your plan allows for individually directed accounts, are you aware that your fiduciary

burden and responsibility for individual participant’s investment choices can be greatly

increased?

Comments:

☐

☐

35. When was the last time the plan was updated or reviewed?

Comments:

☐

☐

36. Have you taken appropriate measures, with the help of an investment professional, to

insure you are providing a source of investment guidance to assist participants in making

sound investment decisions?

Comments:

☐

☐


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37. Where all eligible employees identified and given the opportunity to make an elective

deferral election?

Comments:

☐

☐

38. Do participant loans conform to the requirements of the plan document?

Comments: ☐ ☐

39. Were hardship distributions made properly?

Comments: ☐ ☐

Additional comments, questions or concerns?

Contact

Please contact Greg Moerchen at either (260) 615-7601 or [email protected] for questions.


401k prospecting kit - mesgadomesgado.com/wp-content/uploads/2016/05/hcv-prospecting-kit.pdf · 5....

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