An entrepreneur offering a seminar on investment basics for employees will have to comply with strict regulations and construct a compelling pitch
I offer a unique service, teaching investing basics to employees of companies that offer 401(k) or similar retirement programs. My educational seminar increases participation in the company's retirement plan and doesn't try to get employees to change to a new plan sponsor. How do I best market my service?
—S.G., Las Vegas
Your service is probably best marketed directly to employers, who would then book your seminar as an educational resource for their employees. Your timing is particularly good, since the Pension Protection Act of 2006, which went into effect last month, allows employers greater latitude in providing professional investment advice in the workplace.
"The prior federal law discouraged employers from providing investment advice to their retirement-plan participants," says Lisa Van Fleet, leader of the employee benefits practice group at Bryan Cave, an international corporate law firm based in St. Louis. The new law recognizes that the direction of employees' retirement investments is increasingly becoming the responsibility of the employees themselves, and makes it easier for the company to help out with counseling and seminars such as the one you're proposing.
Sticking to the Rules
"Anybody who provides investment advice for retirement-plan assets becomes what's called a 'fiduciary,' which is a term that carries a high level of accountability and personal liability. Most small employers just didn't want to get into that arena," Van Fleet says. "The Pension Protection Act provides a safe harbor clause, so if employers provide their employees with investment advice within certain parameters, the employers will not be treated as fiduciaries, and don't have to worry about liability if their employees experience negative consequences from following that advice."
In order to fit the new requirements, you will have to be a "fiduciary advisor," meaning that you have the appropriate qualifications and are already registered as an investment broker or dealer. You also have to comply with strict notice regulations, so you're giving seminar participants information that any sophisticated investor would request, such as your fees, the rates of return of your investment recommendations and any potential conflicts of interest involved in your services.
Also, your compensation must be provided for based on your advice, not on commissions you make if seminar participants invest in certain funds that you're recommending, Van Fleet says.
Sell the Benefits
You will want to do substantial educating in your marketing materials, letting employers know about the change in the law, and explaining that your seminars increase employee participation in company-sponsored plans. Your own background, credentials, and experience must be documented, since employers will want to feel comfortable about bringing you in as a resource for their employees. Gather statistics to back up your claims and include them in easy-to-follow graphics on your Web site, brochure, and other marketing materials.
Also, make sure you reassure potential clients that you're providing objective education only—rather than trying to sell their employees on a risky investment venture or new retirement plan. Emphasize the benefits you can provide to the company. Employers these days—particularly owners of small and medium-sized companies—are looking for any reasonably priced extras they can offer to attract and retain good workers (see BusinessWeek.com, 8/14/06, "Small-Business Secrets to Hiring"). Providing regular investment counseling can be an attractive employee-retention tool.
In sending your message out, target publications that are read by entrepreneurs and human-resources professionals. "Look around and figure out who's writing about employee benefits, and where," Van Fleet suggested. "Understand what people are reading in order to stay current on these issues, and then advertise your services there." If you can, come up with some editorial content that you can offer to some of these publications, particularly those written for human-resources professionals. Good luck!