the advisor partnership program (tapp) ® | retirement for investment professional use only. not for...

The Advisor Partnership Program (TAPP)® | Retirement

FOR INVESTMENT PROFESSIONAL USE ONLY. NOT FOR DISTRIBUTION TO THE PUBLIC. 1

00.00.00

ACES A comprehensive approach to growing your 401(k) plan business

INVESTMENT PRODUCTS: NOT FDIC INSURED • NOT BANK GUARANTEE • MAY LOSE VALUE

Advisor Commitment to 401(k) Education and Service SM

FOR INVESTMENT PROFESSIONAL USE ONLY. NOT FOR DISTRIBUTION TO THE PUBLIC.



Important information

• The ideas and information in this presentation are general in nature, are provided for informational purposes only, and do not constitute, nor should they be relied on, as legal advice.

• Legg Mason, its affiliates and employees are not in the business of providing legal advice with respect to ERISA or any other applicable law. Consult with your firm’s legal and compliance department before acting on any ideas or information provided in this presentation, or using the ACES brochure, workbook, or any related materials.

• You and your firm are solely responsible for your use of the ACES brochure and workbook and any related materials, and for ensuring that all services provided by you conform to your firm’s legal and compliance policies and standards.



Sam Walton’s original Walton's Five and Dime, now the Wal-Mart Visitor's Center, Bentonville, AK. Photo taken by Bobak Ha’Eri, September 2, 2006.



Agenda

What’s different about the 401(k) market?

The ACES advantage: ideas and resources for:

• Prospecting

• Discovery

• Closing

• Servicing

Action steps



The rewards of 401(k) plan business

• Recurring revenue

• Sticky assets

• Stability in business needs

- Plans typically make changes slowly and deliberately

• Potential for referrals for individual client business



What’s different about working with 401(k) plans?

Your role:

Your value:

The challenge:

…to facilitate decisions by plan fiduciaries by providing insight and background information (not investment recommendations or advice)

…helping plan sponsors, fiduciaries and participants make informed decisions

…do this without acting as a fiduciary



What’s different about selling to 401(k) plans?

Top priorities for plan sponsors

• Achieve corporate goals supported by the plan (e.g. attracting and retaining employees)

• Protect themselves and other fiduciaries from unnecessary liability

• Have these needs addressed efficiently…since they typically have other roles at company

Why replace their current financial professional?

• Employee dissatisfaction with plan options or education opportunities

• Feeling anxious about fiduciary issues

• Disappointment at follow-through on service commitments



What’s different about selling 401(k) plans?It doesn’t happen overnight

• Winning 401(k) business takes time and preparation

Service, service, service…

• …is what makes or breaks your relationships with plan sponsors

The power of expectations

• It’s vital to articulate the scope of your commitments from the start

Who you know matters

• It’s important to have relationships with TPAs, recordkeepers and other service providers



4 principles for 401(k) success

Excel at education

- The most visible service you deliver

Manage your time efficiently

- Be realistic about how much time you can devote to account service

Steer clear of unintended fiduciary responsibility

- Limit your role to assisting client with information and resources

Articulate a clear process for annual reviews

- Help frame the terms on which your performance will be “graded”



ACES (Advisor Commitment to 401(k) Education and Service)

A systematic process to gain and retain more 401(k) business…

…by emphasizing education and service in every step of the sales process

Prospecting

Discovery

Closing

Servicing



PROSPECTING



Prospecting

Understand your sweet spot

• What sets you apart in this area? Is it your experience, your knowledge, or your service capabilities?

• Identify a particular focus and build your story around it in initial contacts with prospects

Cast a wide net

• Network through business groups, human resources organizations

• Seek prospects using freeERISA.com data or commercial lead sources

Plan your touchpoints

• Keep your name in front of the prospect with a pre-planned series of contacts

• Vary your approach…mix letters, phone calls, emails, handwritten notes, approved brochures



Prospecting resources

Letters and call scripts

• Set #1: focused on quality of service

“What is my plan’s financial consultant doing right now to help me and my plan during this difficult period?”

“Are you fully satisfied with the level of service you are now receiving from your plan’s financial professional?”





• Set #2: focused on fiduciary issues

“These responsibilities, if mishandled, could expose fiduciaries to legal liability that can even put their personal assets at risk…”

“Are you fully satisfied with your current financial consultant’s support for you and the plan in these key areas?





• Set #3: focused on fees

“There’s a dramatic shift under way toward greater transparency in fees in the 401(k) business…”

“Are you fully satisfied with your current financial professional’s support for you and the plan in this important area?”



DISCOVERY



Discovery

Ask for more, not less

• The more you know, the better the proposal

- Position your request for documents as part of a formal due diligence process

• Be sure to ask about:

Education: How old is the workforce? What programs are offered now?

Fees: What is the plan paying for specific services? Are they reasonable? What value do you provide for your own fees?

Check for fiduciary concerns

• Plan sponsors have justifiable concerns about potential liability

• Raising questions about common fiduciary issues can uncover important concerns



Discovery resources

For use with plan sponsors:

Document Checklist

• Demonstrates your desire to understand the plan’s needs in detail

• Covers plan structure, investment menu, financial metrics, education services, employee demographics



Discovery resources


Common Fiduciary Concerns

• Designed to uncover issues that may worry the plan sponsor and fiduciaries

“Are there any elements of your plan administration and decision-making that are not appropriately documented and retained in a due diligence file?”

“Can you clearly demonstrate that you have provided participants with education opportunities to help them make better-informed investment decisions? “

“Have you received any formal training to support you in your role as fiduciary?”



Discovery resources


Fee Assessment Worksheet

• Show you’re out in front of trend toward fee transparency

• Sets up a discussion about the value provided for each fee…including the value you provide for yours

• Covers administrative, trustee financial professional and investment services



CLOSING



Closing

Emphasize your process

• Knowledge of investment products is just a starting point

• To set yourself apart, show you have a well-developed process to:

- pro-actively fulfill your commitments

- coordinate with TPA and/or recordkeeper

Set realistic expectations for service

• The more specific you are, the easier it is for prospects to imagine working with you

• Be sure you can live with what you offer, based on the plan’s revenue potential and your own time availability



Closing resources


Sample Commitment Letter

• Asserts your ongoing commitment to serving the plan and its stakeholders

“You deserve to have a clear understanding of the services you will receive over the course of our relationship”



Closing resources


Service Summary

• Outlines the services you intend to provide and how often you intend to deliver them

- Includes plan assessment, investment menu review, IPS review, performance review, service/fee inventory, investment committee review, education review, and more



Closing resources


Education Policy Statement

• Highlights that participant education is a major concern for you, covering:

- why participant education is important

- your process for evaluating its effectiveness

- your preliminary recommendation for the types of materials and seminars you will provide



Closing resources


Planning Calendar

• Allows for preliminary scheduling for meetings and education services

• Includes reminders of key dates in plan administration

• Shows you are thinking ahead and ready to hit the ground running



SERVICING



Servicing

Conduct ongoing service

• Be pro-active about fulfilling your commitments

- Offer data analytics to help sponsors evaluate potential changes to investment menu

- Provide background information when appropriate regarding changes in regulatory environment

- For plans intending to be 404(c) compliant, help plan sponsor confirm that required disclosures are being provided to participants



Servicing

Document your value

• Prior to annual review meeting, send:

- a formal agenda that includes a review of your service delivery over year

- a checklist of the services you originally offered, noting all that you actually provided

• At the meeting, use the same checklist to note any desired changes in the service mix for the year ahead



Servicing resources

For your reference:

Annual Review Letter and Agenda

• Confirms annual review date and discussion topic, including:

- Confirm/revise existing plan goals

- Examine plan investment performance

- Discuss potential changes to investment menu

- Review participant education/communications

- Review financial professional service delivery

- Review changes in law/regulations pertaining to plan features



Servicing resources

For your reference:

Year-End Service Checklist

• Documents the scope of your contributions and tees up discussion of future changes to service mix



Servicing resources

For your reference:

404(c) Information Checklist

• Facilitates plan sponsor’s review of whether required information is being provided to participants

• Covers both mandated disclosures and those triggered by participant requests



Servicing resources

What will my retirement look like? – Helps individuals imagine their lifestyle in retirement and recognize the need for investing now

Invest for life – Covers the fundamentals of investing, from types of asset classes to the power of compounding

Learning from the lessons of time – Shows how the stock market has grown in spite of periodic economic setbacks, through a look at past covers of Time magazine

* May not be approved for use at all firms; contact your Legg Mason Sales Director for details.

Legg Mason client education programs include:



Action steps

Systematize your approach…

…deliver quality service while managing your time efficiently – utilizing the resources provided by ACES

Be clear about your services from the start…

…demonstrate commitment to process and your readiness to get started

Embrace fee transparency…

…help clients understand what they are getting for their money -- especially from you

Recognize the importance of education...

…as a tool to boost plan participation and position you for referrals

Steer clear of fiduciary responsibility…

…recognize the limits of your role, and be sure to understand and comply with your firm’s compliance policies and standards



“Judge your success not by the harvest you reap, but the seeds that you plant”

- Robert Louis Stevenson



36

THE ADVISOR PARTNERSHIP PROGRAM (TAPP)R

Our Experience. Your Potential.R

The Advisor Partnership Program (TAPP)® is Legg’s Mason’s landmark value-added offering, featuring a wide range of multi-dimensional workshops and seminars that empower financial advisors to build successful practices and educate their clients. TAPP delivers value in four areas of importance to advisors: their knowledge, their skills, their business and their clients. Business Development showcases real-life insights into practice management; Retirement offers a wide array of resources for advisors focused on retirement plan business; Professional Development presents sophisticated and innovative techniques to sharpen individual skills; Investor Education provides resources that help advisors to inform and educate their clients.

All views expressed are subject to change. These are the general views of Legg Mason, and they are provided for educational purposes only and should not be construed as a forecast of future events They do not constitute, and should not be relied upon as, legal, tax or investment advice. Legg Mason, its affiliates and employees are not in the business of providing legal advice with respect to ERISA or any other applicable law. Plan sponsors and financial advisors should consult their own legal counsel and compliance personnel to understand the nature and scope of their responsibilities under ERISA and other applicable law.

Legg Mason, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

All investments involve risks including loss of principal.

ACES - Advisor Commitment to 401(k) Education and ServiceSM is a service mark of Legg Mason Investor Services, LLC.

The Advisor Partnership Program (TAPP ) ® and Our Experience. Your Potential® are registered trademarks of Legg Mason Investor Services, LLC.

© 2012 Legg Mason Investor Services, LLC, a Legg Mason, Inc. subsidiary. Member SIPC, FINRA. FN1213942

INVESTMENT PRODUCTS: NOT FDIC INSURED • NOT BANK GUARANTEE • MAY LOSE VALUE