401(k) Plans - What is Required in Your...

NewHealthStrategies · 04-20-2008, 11:43 PM

What is required in order to sell 401(k) plans in your State.

Many agents would like to work this market but believe that you HAVE to have a securities license. In many states, like Georgia where I am, all you need is a life insurance license.

But since the UNITED States of America is very dis-united when it comes to common insurance licensing practice, I'm sure it's different in other states.

Do you sell 401(k) plans? Why not?

What license is required in your State, if you wanted to sell them?

Note: The reason I'm asking is that many folks (especially the neophytes) believe that pension rep's have this market tied up.... NOT TRUE.

Or... they believe that you must have a Series 6 or 7 license... NOT TRUE (speaking only for Georgia)

I LOVE 401(k) plans. The rep's from the carriers do all the work, you get a decent commission that goes up every year and NO ONE EVER CALLS for service.... it is the very best of all worlds.

CHUMPS FROM OXFORD · 04-20-2008, 11:50 PM

I'm not sure about Ohio. But I do have a Series 6 and 63.

As a consumer, given the choice, I would want the broker discussing 401Ks with me to have at least those two in their pocket.

CHUMPS FROM OXFORD · 04-20-2008, 11:52 PM

"NO ONE EVER CALLS for service"

Oh...by the way...if you're actively managing their portfolio (even through MFs)...you should be contacting them 2-4 times per year.

padthaiforlunch · 04-21-2008, 03:03 AM

In Colorado, you only need be an insurance agent. Anico has a non-registered VA - WealthQuest lll. The employees of the client get to choose which funds they are in.

The rub is that you are left with copies of the prospectus to hand out. So now I have to explain 11 different fund families and their members to the employees.

My understanding of this is elementary, but I suspect most 401(k) plans offered by carriers are wrapped in VA's. True?

Newhealth - How do you handle the presentation to the employees?
- Which carriers do you use?

somarco · 04-21-2008, 06:59 AM

It has been a very long time since I worked the retirement planning market. One of the reasons I left it behind was the liability to the agent. It seems that in this litigation happy era, employees are quick to sue if their account loses money. It doesn't seem to matter they have been given choices, and counseling on the pluses & minuses. You are still a target.

Your E&O increases significantly if you are in the retirement market.

Chkndinner14 · 04-21-2008, 07:56 AM

Danger Will Rogers!!

While I have heard this too that you don't need a securities license to sell a 401k, why would you do it without one?

The NASD is a fed thing not a state and with out a license you couldn't do such things as.

1. Help the employer pick which funds will be in their plan.

2. Council someone at an enrollment meeting.

3. Provide reviews of accounts.

4. Sell the rollover IRA when a participant leaves his job. (The real compensation)

As a matter of fact, I can't think of how you could legally do the presentation.

Many of the law suits that come about are because the agent/rep had crap funds in the plan. You can't make reccomendations, how would you handle this. If you say the rep from the fund company will. Well when the lawsuit comes you will be named since you recd commission. Without a license you can't get E & O for securities, what do you do then?

You will get eaten alive by a seasoned licensed rep that will replace your new startup plan (no money) when it finally has some assets in it.

Do yourself and your clients a favor and go get a license.

sman · 04-21-2008, 11:49 AM

Originally Posted by NewHealthStrategies

What is required in order to sell 401(k) plans in your State.

Many agents would like to work this market but believe that you HAVE to have a securities license. In many states, like Georgia where I am, all you need is a life insurance license.

But since the UNITED States of America is very dis-united when it comes to common insurance licensing practice, I'm sure it's different in other states.

Do you sell 401(k) plans? Why not?

What license is required in your State, if you wanted to sell them?

Note: The reason I'm asking is that many folks (especially the neophytes) believe that pension rep's have this market tied up.... NOT TRUE.

Or... they believe that you must have a Series 6 or 7 license... NOT TRUE (speaking only for Georgia)

I LOVE 401(k) plans. The rep's from the carriers do all the work, you get a decent commission that goes up every year and NO ONE EVER CALLS for service.... it is the very best of all worlds.

You must not be selling 401k's with mutual funds. If you were, you would be required to have a securities license (or be an RIA and charge a fee).

If you are selling the ANICO product that someone mentioned, it's a highly priced plan. Approaching 2.50% after adding all M&E, Admin Asset Fee and Sub-Account management expenses. Not to mention a 7 year surrender charge.

I prefer to use plans like PAi's Plan4Ten or Plan4Most. You get multiple no load or sales load waived funds to choose from and a minimal admin charge each year. I love when I come across small companies that have their 401k set up in annuities. After I show them the savings and what it means to their future portfolio balance, it's usually not a hard sell.

You also mention no service work. Every 401k/Profit Sharing plan I've rolled is due to the fact that they haven't heard from their rep in years. If you're not keeping in touch with them and reviewing their plan, someone else is. Maybe me, since I'm in Georgia.

LGilmore · 04-21-2008, 03:21 PM

It becomes the old question of why do you have a tax sheltered product INSIDE a tax sheltered product? Is there a good reason to have that high of expenses?

As retirement plan laws force more transparency, someday you may have some "splaining to do" .

A 6 and 63 or a 7 isn't that hard to get. If you can't pass those exams, should you be advising retirement choices?

But good luck to you. Old insurance agents advice I try to follow, never sell something for a quick sale that you will have to pay back 5 times over later....

NewHealthStrategies · 04-21-2008, 10:31 PM

I love that you guys/gals? read more into a question that was actually stated. I only asked what the req's were to sell 401(k)'s.... not that I was the holder of that minimum standard. In fact I hold a securities license.

I didn't say that "I" didn't service the account... I stated that there is virtually NO one complaining/calling to ME (a nice twist for a change).

The liability topic is an interesting one in that most of sell a product (health insurance) that has more POS touch-points and virtually is wrought with litigation hurdles, but that doesn't seem to scare anyone.

I'm not suggesting that everyone SHOULD be selling 401(k) plans... I'm simply opening the door to those looking for a revenue stream that perhaps they had not thought of... or considered because they were under the impression that it required more than it actually does.

I maintain that there is a wide open market for those with even the minimal license requirements... albeit you might have to rely more heavily on the carrier (401(k)) rep's to perform many of those services for you... but if you're at least Series 6 licensed and you're looking at the EMPLOYER market as a supplement to what you're doing in the INDIVIDUAL market, this is a great place to investigate.

I guess my idea of selling pre-paid legal plans and pet insurance will met with the same resistance?

LGilmore · 04-22-2008, 01:56 AM

Again, you have to explain expenses. A 401(k) has to make economic sense from a operating standpoint. A small group and a "true" 401(k) may not be that great of an idea as the per head costs aren't effective. An employer may spend more in fees than he/she matches to employees.

Not saying you have a bad idea, but lots of cost effective ways to offer retirement plans.. or are you using 401(k) generically?

Chkndinner14 · 04-22-2008, 07:53 AM

Originally Posted by NewHealthStrategies

II maintain that there is a wide open market for those with even the minimal license requirements... albeit you might have to rely more heavily on the carrier (401(k)) rep's to perform many of those services for you... but if you're at least Series 6 licensed and you're looking at the EMPLOYER market as a supplement to what you're doing in the INDIVIDUAL market, this is a great place to investigate.

I was a little suprised by your initial post. You have been in the industry a long time and have had several interesting and informative posts.

I would still have to disagree with you. This is not a place to dabble in for an inexperienced rep.

That's what makes this work, different points of view. Do you ever play that little executive golf course in Marietta? I want to say it's Fox Creek. Nice place to tune up the game.

NewHealthStrategies · 04-22-2008, 06:59 PM

Chkn: I have to remind myself that I've been doing this a long time and you're most likely correct that inexperience will get neophytes into a bucket of hot-water in a hurry.... but I still maintain that if you work close with the 401(k) rep's they will do almost all the work for you... but I'll concede the point and take the more conservative road on this topic.

I have played Fox Creek (and the it's neighbor...Legacy)...but there are too many regular length courses to choose from, so they aren't high on my play-list.

Stonewall · 05-15-2008, 08:07 PM

NHS is right! My state allows you to sell Group Variable Annuities (i.e. 401k's w/o a securities license----and yes, they do include variable investments like mutual funds). I gave my 6, 7, 63, and 65 up and only hold my L&H---I also hold a profesional designation. Let me tell you, a securities license does nothing to make you an expert on anything!

Back to work for me!