A fresh interest in attracting small business clients is giving rise to a slew of new tech-enabled products targeted at this market, ranging from payments to employee benefits.
The newest play is from Bank of America (BAC), which on Monday released a new retirement planning product that enables employees at small businesses to access 401K services via the web, with minimal overhead for the employer.
The product, which is being offered by Bank of America Merrill Lynch's Merrill Edge (a BofA Merrill wealth management unit), is aimed at firms with less than 20 employees. It will offer a menu of fund options or allocation strategies that can be executed and managed with minimal work required from the employer. Most of the work is self-serve and available online.
Rich Linton, a managing director and head of business retirement solutions at Bank of America Merrill Lynch, says internal research suggests web-accessed retirement plans would be a good fit for small businesses. The institution, which has four million small business clients, found that 58 percent have signed on for online banking, which he says indicates they are inclined to adopt value-adds tied to the web banking portal. He also says 66 percent of business owners say retirement benefits would help attract and retain talented employees. "That's normally something you would expect from larger businesses," Linton says.
To participate in the new 401K program, the small business owner can set up the benefit in about 30 minutes and participants can enroll online. Employees will have about 15 funds to choose from, and the bank has hired Morningstar to help with the choices. Morningstar will also offer five allocation strategies for employees to choose from based on appetite for risk.
"This takes the burden away from the plan sponsor," Linton says. "Many small business owners cite this as the reason they don't offer retirement plans. They don't want to be responsible for the investment decisions."
Bank of America's move is the latest attempt by financial institutions to curry favor with small businesses, which often fall between the cracks of banks' treasury management functions and consumer functions, neither of which is a good fit for small businesses.
This small business service gap has left a bad impression. Internal research done by U.S. Bancorp (USB) in preparation for a small business social media project revealed that small businesses have a largely unfavorable impression of banks, viewing them more as a venue for transactions rather than a partner or relationship provider. To improve that impression, U.S. Bancorp is using a Facebook page to operate contests and a venue to post videos.
In another recent example of a financial institution trying to win over small businesses, Community Choice Credit Union has added payments services such as accounts payable and receivables, person to person and remote deposit capture. Bill.com has also gotten into the act by offering a cash flow predictor.