BOSTON -- Putnam Investments rolled out a full-service 401(k) package for small businesses last week, in a move toward capturing more of the retirement-planning market.
The Boston-based mutual fund giant expects banks to become a major distribution channel for the product over the next few years.
"I would hope over time that the percentage of business we get through banks would be similar to what we get from our mutual fund business" which is roughly 30%, said Chris Meyer, Putnam's director of product management.
While Mr. Meyer doesn't envision banks as the primary product sellers in the first two years, he predicted that "banks will be better than financial planners and brokers, once they dedicate the people" to the 401(k) market.
Tax Benefits
A 401(k) is a salary-reduction plan that allows employees to shelter part of their compensation from taxes and save for the future at the same time. Employers may also contribute to their employees' plans and receive tax benefits, making them popular to business owners.
Although over 90% of large and medium-scale businesses already have 401(k) plans in place, businesses with 200 employees or fewer are a relatively untapped market.
"Only 6% of the entire small-business marketplace has a 401(k) package in place," Mr. Meyer said. "So the opportunities are immense."
Way to Generate Business
Any company that has a selling agreement with Putnam can sell the 401(k) package. So far, several banks have expressed interest in marketing it, Mr. Meyer said.
"A number of banks have told us that they are going to send a couple of reps out to talk to some of the business owners that they already have relationships with," he said. They are jumping on this program as a chance to generate more business, he added.
The banks that will be the biggest sellers will be those that are more oriented toward servicing small-business owners, Mr. Meyer said.
"All [banks] need to do is talk to small-business owners about their 401(k) needs," Mr. Meyer said. Once they find interested companies, the bank representatives contact Putnam, which provides support throughout the sales procedure.
Based on customers' needs, Putnam draws up a proposal which the banks representative then explains to his customer.
"All we're asking them to do is what they already do best -- building relationships with customers," Mr. Meyer said.
Putnam already offers 401(k) packages, which bundle administrative and investment management services, to firms with more than 200 employees.
