Meeting the Need of your Client

ARTICLE | February 13, 2025

Written by Matthew R. Cosby

As a financial advisor, your clients rely on your expertise. When deciding on the right type of retirement plan for a small business, it can be a challenge to pinpoint the best fit.

Here’s a quick tutorial to help you guide your clients effectively.

SIMPLE IRAs and SEPs are both cost-effective and simple solutions for small employers. While they offer simplicity, they lack the flexibility some clients may need. For instance, a 401(k) could be a more suitable option when your client’s business has:

• Ownership with higher income levels relative to their staff
• Ownership that is older in age compared to the rest of the employees
• A desire to contribute more as business owners
• A need for greater flexibility in plan design—like contributions, eligibility, loan provisions, and vesting schedules

Every client’s situation is different, but here’s an interesting scenario:

There are two business owners and three staff members. We compared SEP, SIMPLE IRA, and Safe Harbor 401(k) options, and in this case, the Safe Harbor 401(k) emerged as the best choice. It allowed the owners to invest significantly more than the other retirement vehicles, lowering their personal taxes while reducing the company’s overall tax burden.

Plan Design Comparison

Many clients who begin with a 401(k) plan continue with that strategy long-term. This not only strengthens your client relationships but also provides you with a larger asset base to manage, potentially increasing your revenue over time. Reviewing these options with your client ensures that you’re the one offering the best alternatives.

Contact the Retirement Plan Services group at HMV to model these scenarios for your clients. Also, although not covered in detail today, pairing a Cash Balance Plan with a 401(k) can be a powerful strategy for business owners who want to contribute even more toward their retirement goals.

We appreciate your partnership and look forward to helping you grow your client base while better serving your existing clients.