Young 401k Investors: The Lifetime Clients of Tomorrow?

By Wes Campbell, Account Manager on Friday, June 17th, 2011

Today, 401k retirement plans are gaining popularity faster than ever. Not only are more and more companies offering them, but many of these companies are starting to provide automatic employee enrollment. That means the need for proper investment advice is becoming increasingly important as 401k account holders seek professional guidance.  

In particular, there is a growing legion of young employees who are opening 401ks as part of their benefits package as they enter the workforce. Many of these individuals are inexperienced when it comes to investing, and eager to get advice from seasoned investment experts who can help them maximize the long-term value of their portfolios.

This presents an opportunity for advisors. And it represents a change from the “set it and forget it” mentality that has often pervaded the 401k marketplace. In fact, I can speak from firsthand experience when I describe my mindset when I was a youthful worker just out of college—new to the world of 401ks. When I started investing in my first 401k account, I had no idea what funds to invest in, how much to invest or how often I should re-allocate. All my money went into a single fund, with no balancing between funds. I invested under the match amount, leaving money on the table. And to compound matters, I totally underestimated how important professional investment advice could be. 

Finally, I sought the advice of my family’s financial advisor. She made some changes in my portfolio and I started seeing immediate results. Furthermore, I had the peace of mind that I was now on the right track.

Why the personal story? Because it illustrates how this financial advisor gave me advice at the right time in my life. I’d bet that in many cases, a financial advisor who advises a novice on 401k investments will eventually translate that relationship into full advisory services on a diverse array of investments over the years—perhaps even converting the investor into a lifetime client. And that can mean lots of revenue for your firm.

The lesson: Be proactive about providing clients with advice on 401k assets. Use these types of accounts as a way to gain a foothold in the difficult-to-reach younger market. “Get ‘em while they’re young” – and even if your clients are older, make a concerted effort to use 401k opportunities to expand your AUM. There’s really no reason not to advise on these assets, as it really helps your client base and can add to additional revenue when you bill. I know how much my decision to consult an advisor on my 401k has helped…so the sooner you can get out and help your clients with their 401ks, the better.     

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