Good things come in small packages—particularly when it comes to small retirement plans. In fact, small defined contribution plans are expected to experience significant growth through 2015, as small business owners seek ways to attract and retain talent, rebuild and diversify personal assets, help employees secure retirement peace of mind and save for their own retirement as well. 

This creates a tremendous opportunity for financial professionals who can sell and service small plans efficiently. Each sale can help to:

  • Generate a steady stream of revenue
  • Create a wealth of cross-selling opportunities
  • Offer access to highly qualified prospects, including business owners and executives

An underserved market that's big—and getting bigger

According to the U.S. Small Business Administration, the 28 million small businesses in the U.S. represent nearly 99.7 percent of all firms in the country. They employ more than half of all private sector workers accounted for three quarters of net new jobs in 2010.

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At the same time, small businesses are actually less likely to have retirement plans than large companies. The Bureau of Labor Statistics reports only 40 percent of companies with one to 49 employees offer a defined contribution plan, compared to 74 percent of companies with 100 to 499 employees.

Despite the potential, this market is relatively underserved. According to Cerulli and Associates, there were about 335,000 financial professionals in total in 2009, and fewer than 10 percent focused their practices on retirement plans. 

The vast majority of small business owners rely on financial professionals for help with retirement plans according to Cerulli. In fact, research shows that the number one reason a plan sponsor selects a service provider is financial professional recommendation, showing the important role financial professionals play with business owners.

 Where to start

To efficiently market to small employers, it's important to keep your prospect pipeline full. You can find new prospects by

  • Building relationships with centers of influence who serve small employers such as attorneys, bankers, CPAs, business brokers, etc.
  • Joining local business organizations such as Rotary or the Chamber
  • Networking, networking, networking
  • Asking for referrals  

Once you have names, do your homework before you meet with key contacts. Form 5500 is a great source of information and you may be able to identify areas of weakness and opportunity.

Retirement plans as door-openers

In addition to generating revenue from the plan itself, retirement plans can be great door-openers to grow your business with cross-selling opportunities. Our recent survey of business owners found that 65 percent of those who use a financial professional for business operations use that same financial professional for their personal financial issues. 

Some cross-selling opportunities include:

  • Supplemental retirement plans    
  • Individual financial services  
  • Business protection plans   
  • Other employee benefits programs   

How to make small plans profitable

The key to success in the small plan market is efficiency. That takes the right tools and resources so you can maximize your profits.

Plan service providers are a good source of these resources. For example, this Small Plan Resource Center offers tools, resources and support to help efficiently tap into the small plan market.  

You can also benefit from the experiences of other financial professionals. Consider joining an upcoming live Twitter conversation for financial professionals on capturing untapped markets. #AdvisorTalk will be held Wednesday, Nov. 14 at 3 p.m. Central at www.twitter.com/#advisortalk.  

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