Advisors often overlook the hidden potential in managing 401(k) assets for foundations and other nonprofits. The reason nonprofits are not targeted as much as businesses is unfamiliarity with how these organizations function and because nonprofits typically have comparatively small 401(k) accounts. The potential income from managing these accounts may not seem to justify the amount of time and effort required to do an exceptional job, but in my experience, quite the opposite is true.

The profit potential lies in becoming familiar with the unique organizational structure of nonprofits, and the fact that their boards rarely receive a comprehensive analysis of their benefit plans due to the limited size of their 401(k) assets. By comprehensive, I refer not just to the technical analysis of the plan's investments, fees, expenses and other related details; I refer to a process that adopts a financial planning approach, one that addresses the three core principles underlying a successful retirement:

1) Sufficient savings. The primary roadblock to a successful retirement is insufficient savings. The financial planning approach evaluates employee participation and salary deferral averages.

2) Taxes. The approach assesses the demographics of the plan's employees to determine whether a pre-tax or Roth structure is most tax efficient.

3) Choosing the appropriate investments. Many people believe this is the most important factor but they are usually the people who haven't saved enough for retirement. The financial planning approach employs a sophisticated platform, much as Fi360 software, to thoroughly investigate plan investments, fees, expenses, manager performance, rate of return, alpha and related factors.

Providing nonprofits with a comprehensive technical analysis inside a financial planning wrapper is a creative, personalized approach they rarely see from their advisors. It supplants the typical process of clinically going through the numbers, making sure the plan's funds are up to date, reviewing participation, perhaps suggesting auto enrollment, and saying goodbye until next year. Instead, the nonprofit receives a full-blown technical analysis but is also engaged in an animated business planning discussion: what went well last year; what didn't; what do we expect to accomplish this year; what type of service model will best serve the specific requirements of the organization and it's plan participants? The conversations generate greater perceived value and excitement by establishing retirement fund goals for short and long term. Nonprofit trustees are unaccustomed to having these kinds of conversations with their plan advisor, and are energized to hear about planning strategies to help increase plan participation and employee retirement satisfaction.

This higher level of planning and attention can lead to an opportunity to manage the foundation's assets, which invariably represent a much larger amount of money. In addition, because nonprofit board members are typically successful businesspeople in their own right, the process often opens the door to personal planning and retirement fund management for board members and their companies.

This happened for our firm recently with a large national foundation that has multiple CEOs running different divisions of the organization. Each of these executives was a successful businessperson running their own company in addition to their foundation duties. The financial planning approach we took led to ultimately securing both personal and business planning and investment management assignments for several of the executives. Two of the executives also served on other foundation boards and we were later awarded management responsibilities for the assets of those organizations. Once an organization realizes your advisory is willing to exceed expectations in servicing their 401(k), there is literally no limit to the opportunities created by an appreciative referral network.

Nonprofit board members are busy people who dislike attending repetitive meetings conducted by various investment management providers. They would prefer to find a single competent, reliable source for managing both their 401(k) and foundation assets versus dealing with multiple sources. Of course, becoming the provider of choice is contingent upon doing a superior job with the first assignment, however small in terms of managed assets. That involves spending the time to become familiar with the organization, its people, culture and goals, and backing that knowledge up with great service.

Nonprofit 401(k) plans are almost always underserviced. Be the advisor that goes the extra mile for the trustees of these plans, regardless of their size. Learn what is most important to nonprofit trustees and board members. Have candid discussions about the specific needs and objectives of the organization and employees, who are usually minimally paid workers or volunteers. If the nonprofit would like an annual group presentation to its employees, make it happen. Depending on the number of participants, make yourself available for one-on-one Q&A sessions or conduct webinars.

While sound technical analysis is essential for superior 401(k) management, delivering it with a financial planning approach will vastly enhance your chances for additional assignments. In the process, you will make life easier for nonprofit plan trustees, most of who are not money managers and so need help putting technical analysis into a perspective that relates to the needs and objectives of their organization and employees. The financial planning approach involves uncovering those requirements and going the extra mile to ensure they are met.

What most nonprofit 401(k) plans lack is not good investments or professional investment management; what's lacking is creativity, an elevated level of service and participant education. Emphasize quality service and a financial planning approach and you may open the door to bigger asset management opportunities. Nonprofit 401(k) accounts may be "acorns" for advisors, but extra effort can lead to management of some big oak trees, and even trees in other forests.


Mike S. Sheets is president of Provence Wealth Management, Irvine, Calif, and is also a registered principal with and offers securities through LPL Financial. He can be reached at (949) 222.6400, [email protected] or www.provencewealth.com.