5 Best Prospecting Strategies for 401k Advisors

Oleksandr Rohovnin
Content Marketer
11 minute read
Oleksandr Rohovnin
Content Marketer
11 minute read

This article is a part of our comprehensive financial lead generation series, where we dissect lead generation for financial advisors and related industries: real estate, mortgage, business loans, and more.

With defined-contribution retirement plans at the forefront of the private sector, 401(k) plan advising is one of the most profitable avenues a financial advisor can tap into. For a 401k advisor, the ever-growing nature of savings on the client’s plan also means growth in their bottom line, book of business, and customer relationships, just to name a few major benefits.

That said, prospecting 401k clients isn’t simple: the market is saturated, so you must go the extra mile with your lead generation, prospecting, and nurturing to stand out from hundreds and thousands of other advisors.

Now, “going the extra mile” isn’t something abstract – it means having outrageously good strategies to nurture your prospects. Speaking of which, I’ve researched the market to create a list of the 5 most effective 401k client prospecting strategies for financial advisors.

Source: GIPHY

Before we get to the crux of the matter, though, allow me to give you an overarching perspective on a 401k plan so you and I are on the same page.

How Does a 401(k) Work?

A 401(k) plan is one of the major retirement savings plans offered in the United States by employers – alongside plans like 403(b), 457, and SIMPLE IRA – to help employees save for retirement via regular payroll deductions.

Here is the most important information about 401k plans:

Eligibility The eligibility criteria are set by an employer, with the main factors being the applicant’s age, employment status, and length of service. Usually, an employee must be at least 21 years old and have worked for a company for 1,000 hours within the last 12 months.
Contribution Limits For 2024, the maximum contribution limit to a 401k plan is $23,000 for individual contributions (paid by an employee) and $69,000 for combined contributions (paid by an employee and employer). For people aged 50, there’s an additional catch-up contribution limit of $7,500 ($76,500 for combined contributions). There’s no minimum contribution limit to a 401k plan.
Employer Contributions Some employers offer a contribution benefit to employees to win their loyalty. For example, it can be a 100% employer contribution of up to 5% of the employee’s salary (if the employee earns $5,000, the employer’s contributions will be capped at $250 monthly).  Some employers may even contribute to a 401k plan if the employee doesn’t contribute to the plan themselves (non-elective contributions). Employer contributions can also be based on the company’s profit or difference in employees’ salaries.
Tax Benefits The two major tax benefits of a 401k plan are that participants contribute pre-tax income, and all investment gains are tax-deferred. In other words, clients don’t have to pay taxes until they withdraw their money.
Investment Options Clients must choose among the available investment options within their 401k plan based on their financial goals and risk tolerance: target-date funds, mutual funds, stable value funds, company stocks, and more.
Withdrawal Limits Penalty-free withdrawals are available for 401k plan participants aged 59½ or older. Earlier withdrawals come with a 10% withdrawal penalty. The maximum amount per withdrawal is not limited. You can withdraw all your money from your 401k plan while paying an income tax and a 10% penalty if you’re younger than 59½.
Required Minimum Distributions Starting at age 72, participants must withdraw a specific amount of money from their account (based on their life expectancy and account balance) not to pay the penalty of 25% of the amount not taken on time.
Other Every 401k plan has unique rules for various categories of employees. For example, some plans enable penalty-free withdrawals for medical expenses and other emergencies. 

For financial advisors, 401k prospecting is a lucrative endeavor. An average person must accumulate around 10 times the annual salary by age 67 to retire successfully, making onboarding 401 clients early on a game-changing business strategy.

Financial Planning Career GIF by Rewire.org - Find & Share on GIPHY

Source: GIPHY

Likewise, 401k advisors can capitalize on employees who roll over their savings into an Individual Retirement Account (IRA) or another employer’s retirement plan. These 401k rollover leads also represent a huge market, but they are not exhaustive to the types of clients 401k advisors can deal with.

How Can a 401k Advisor Earn on Clients?

Asset-Based Fees Many 401k advisors use the so-called AUM fee structure, charging around 1% of the assets under management. This way, the bigger the portfolio, the more you earn. In reality, however, big portfolios tend to avoid the AUM fee model. For example, paying 1% of a $100k portfolio may seem a fair deal, whereas splurging the same 1% of a multi-million-dollar portfolio looks more like a rip-off.
Performance-Based Fees Some 401k advisors charge based on portfolio performance, usually a percentage of the profits exceeding the estimated benchmark rate: for example, 20% of returns exceeding the S&P 500 index return plus 2%. This performance-based payment model guarantees the financial advisor is interested in growing the client’s portfolio. For example, if the S&P 500 index return is 8%, and the client’s 401(k) account return is 13%, the financial advisor will earn 20% of the 3% that exceeds the 10% benchmark.
Hourly-Based Fees The hourly pricing model is popular among 401k advisors providing project-based assistance and ad-hoc services. For example, if a business owner wants to set up a retirement plan for their employees, paying $200 to $500 an hour for great financial advice may be times less expensive than a long-term commitment.
Retainer Fees Retainer fees are charged for pre-defined, recurring advisory services regardless of the portfolio size. This payment model is often used for regular services like employee education, investment monitoring, and compliance assistance.
Commission-Based Fees 401k advisors can receive a commission on the sale of a recommended financial product within a 401(k) plan. That said, there are numerous regulatory provisions to comply with, so employing this payment model may not be simple.

There are more ways to earn on 401(k) plan clients via different payment models and services. For instance, as a fiduciary 410k advisor, you can charge more because of the higher standards fiduciary advisors are held to.

5 Prospecting Strategies for 401k Advisors

1. Target the Right Leads to Get More Prospects

Prospecting 401k clients isn’t the same as generating them; what’s more, the former is impossible without the latter. Simply put, to prospect advisees, you must generate them first.

    • Prospecting is identifying high-intent clients out of the generated leads, whereas lead generation is identifying wide groups of potential clients, some of whom can potentially be prospected.

    Here’s an example of the difference between a 401k lead gen and prospecting:

    401k Lead Generation 401k Prospecting
    A 401k advisor launches a lead generation campaign for small businesses in New York, resulting in 15 inquiries After receiving the inquiries, the 401k advisor examines every candidate to reveal the most high-intent clients.

    Long story short, 401k lead generation is about attracting potential clients, while 401k prospecting is about qualifying them so you can contact those who fit.

    Here are the groups of financial advisees a 401k advisor can target:

    Small businesses Small businesses seek cost-effective, easy-to-manage 401k solutions with a transparent pricing policy.
    Medium-Sized Businesses Medium-size businesses look for customizable 401k plans to cover diverse employee demographics and educate employees about the benefits of a retirement plan
    Large Businesses Large corporations want an all-encompassing 401k solution that meets the needs of a diverse workforce, including compliance with the integrational regulations
    Employees Employees may seek 401k advice to maximize their retirement savings, devise an individual saving strategy, or clear up anxiety.

    2. Address the Common Concerns to Build Initial Trust

    While every 401k client is unique in size, demographics, and demands, there’s a trick you can use to prospect leads you don’t know well: addressing the general problems of the niche that many prospects are facing or will face in the future.

    Here are some of these aspects:

    Compliance For 401k advisors, compliance with relevant regulations like ERISA and SECURE is a must. Many companies will just assume you comply, but mentioning this can strengthen your credibility in their eyes all the same.
    Complexity As a 401k advisor, you should excel at explaining complex things in simple language. The rules and investment options are overwhelming, so you must ensure clients easily digest this information.
    Market Volatility The growth of a 401k investment portfolio is subject to market volatility, so you should acknowledge this aspect and explain how you will navigate.
    Fee Structure Communicating your fee structure clearly, along with long-term financial implications for the client – why hiring you is cost-effective – is crucial for fostering mutual trust.

    3. Exceed Their Expectations

    Quality segmentation can help you provide accurate, quick, and profound answers because you will know the common concerns in advance.

    Here are some popular requests to 401k financial advisors:

    Young Employees Advice on starting early contributions, risk assessment, budgeting & tax advice
    Mid-Career Employees Contribution optimization, diversification strategies, emergency fund planning
    Pre-Retirees Retirement income planning, healthcare planning, and lowering specific investment risks
    High-Income Employees Optimizing investment options, leveraging taxation strategies, and executive benefits
    Non-Profit Organizations Navigating compliance requirements, employee education around retirement planning, and retirement plan design for NPO

    4. Ask for Referrals

    It’s generally accepted to ask for referrals after a purchase, but you can sometimes step away from this practice, asking for referrals at the point of the maximum value. For example, if you feel like a particular conversation was especially helpful, you can risk asking for referrals right away.

    Likewise, you can set up an automated referral program to encourage prospects and clients with cash rewards and bonuses. A great referral program should reward both the referrer and the referral and include loyalty bonuses so long-term referrers would retain motivation.

    5. Automate Prospecting as Much as Possible

    Try to automate every lead generation and prospecting routine so you can handle more 401k leads without sacrificing quality.

    Here are some of the must-have automation tools for 401k advisors:

      • Lead tracking software – collecting exhaustive data on leads, prospects, and clients
      • Lead distribution software – connecting clients to the right financial advisor
      • Lead analytics software – analyzing the customer journey on the fly and strategically

      Depending on the niche, scale, and capacity, you may need specific behavior analytics software, call management software, or marketing automation tools for email or social media outreach. 

      Here’s how Phonexa’s LMS Sync can help 401k advisors in prospecting: 

      How To Get Leads as a Financial Advisor

      The good news is that 401k lead generation isn’t different from lead generation in other niches. Whether you are acquiring customers in mortgage, insurance, or home services, you have only three ways to go:

      • Acquire leads using paid advertising

      • Buy leads from lead generators and marketplaces

      As a financial advisor for 401k, you might want to combine all three strategies to acquire financial advisor leads from different markets. For aspiring 401 advisors, a good idea would be to start building their organic traffic channels while carefully purchasing exclusive financial advisor leads they can convert on the spot without much marketing or nurturing.

      Manage Your 401k Leads More Effectively with Phonexa

      Today’s 401k success recipe looks much like minimizing the time-and-money distance between 401k lead generation and conversion. And this is only possible if you employ a comprehensive lead management system that covers every business avenue from top to bottom.

      Phonexa is here to help you convert more 401k clients.

      We offer a cutting-edge lead management software suite that will close all loops between clicks, leads, and conversions while bringing all essential data into one dashboard. This puts you in the driver’s seat of your business and eliminates the need to juggle different systems.

      Here’s more about Phonexa’s revolutionary lead management suite:

      Get eight proprietary performance marketing tools now at a single price starting at $100 per month, or schedule a free consultation to learn more about how Phonexa can elevate your 401k lead generation, prospecting, and conversion.

      Frequently Asked Questions

      Who are 401k advisors?

      401k advisors provide financial advice services to clients, who are mostly companies interested in running a 401(k) retirement plan for their employees. For 401(k) advisors, guiding retirement planning clients can be quite profitable if you know the ropes and can effectively generate and prospect this group of financial advice seekers.

      Do I need a financial advisor for my 401k?

      Whether you need a 401k advisor depends on your subject knowledge, risk tolerance, budget, and whether you are comfortable with a 401k plan advisor managing your plan. More often than not, hiring a 401k manager results in getting peace of mind and precise financial decisions.

      Who is eligible for a 401k plan?

      The common eligibility criteria for a 401k plan require the applicant to be at least 21 years old and have worked in a company for at least 1,000 hours within a year. However, part-time and seasonal employees may also be eligible for a 401k plan, as the eligibility requirements are established by an employer.

      What is the difference between the employer and the sponsor in a 401 plan?

      Whether there’s a difference between the employer and the sponsor usually depends on the size of the company. In small companies, the employer and sponsor are usually the same entity. In bigger companies, the sponsor may include third-party 401k advisors, record keepers, and administrators to ensure day-to-day operations and compliance.

      Got Questions?

      Get in touch! We are available 24/7.

      Oleksandr Rohovnin avatar
      Oleksandr Rohovnin
      Content Marketer

      Oleksandr Rohovnin is a Content Marketer at Phonexa. His passion is digital marketing, innovative technologies, and – above all – distilling vast amounts of complex information into engrossing narratives anyone can relate to. At Phonexa, Oleksandr stokes passion for marketing automation and lead generation in every story he curates.

      Education: Zaporizhzhya National Technical University

      Expertise: Digital marketing, affiliate marketing, call tracking, lead tracking, insurance


      • 8+ years of writing and editing experience in B2B and B2C

      • Unconventional synergy of writing talent and technical knack

      • Avid proponent of sports, gaming, and reading

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