4 Steps to Becoming a 401(k) Specialist


Greg Makowski
Founding Partner/Managing Member, CFS Investment Advisory Services


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Key Takeaways

  • See client departures as an opportunity. Adjustments you make to your practice and knowledge to respond can tap new growth.
  • Specialization can expand your firm’s addressable market as you become the go-to resource with unique skills.
  • Keep your staff’s skills and firm’s processes up-to-date as minding small details is that much more critical when specializing.

A few years after Greg Makowski cofounded CFS Investment Advisory Services in the early 1990s, he came to a frightening and career-defining realization: He was losing clients.
Many of them were leaving, not for a competitor, but to convert their profit-sharing and money-purchase plans into 401(k) plans, something CFS didn’t offer. The 401(k), now the most popular form of employer-sponsored retirement plan, was still relatively new at the time. And the CFS team didn’t think they understood it well enough to incorporate it into their business model.

We spoke with Makowski about how a call from a friend and an entrepreneurial spirit turned his business around, transforming it from a wealth-management-only firm to one of the top 401(k) consultants in the country.

1.   Take Opportunities, Even If You Don’t Immediately Know How to Execute Them  

In the midst of his clients’ departures, Makowski was presented with an opportunity that changed everything.

A very large non-profit organization was calling large consultants looking for something that couldn’t be found on the market. It was shutting down its pension fund and looking for an “open architecture platform” that could feature multiple mutual fund companies on one trading platform. By chance, a friend at one of the large consultants sent the request to Makowski asking, “What do you know about this thing?”

The truth was he didn’t know much.

“(But) we put our heads together and got to work,” Makowski says. He and his team pooled their knowledge and reached out to record-keepers, accountants and other shops they thought could help or might already have some experience with open-architecture 403(b) plans. The work paid off. “They hired us instead of those large consulting firms, and they’ve been a client ever since.”

That client ended up changing the entire makeup of his business. One non-profit led to a larger one, and then another. And soon enough, they were able to dedicate a portion of the firm to retirement plans. 

2.   Focus on the Human Touch as Much as the Technical Skills

Makowski and his cofounder quickly recognized that being a 401(k) consultant requires specialized skills. In return, the 401(k) space offers some protection from the pressure on the rest of the industry from robo-advisors and technology, Makowski says.

On top of the technical expertise, having a human business that focuses on organizations who view their plans as a real employee benefit, as opposed to a method of cost-cutting, has gone a long way in helping CFS grow, Makowski says. The firm prefers to work with “employers who are focused on compliance and employers who look at their employees as an asset and not a liability.”

For an advisor who can marry the technical and the human touch, being a 401(k) consultant “is a wide-moat business,” Makowski says. It keeps clients coming back for the specialized services CFS has to offer while providing protection from competitors who aren’t willing to go so deep into the weeds on these complicated issues.

3.   Become Fluent in ERISA and Labor Regulations

The 401(k) space isn’t kind to dabblers: Unprepared advisors end up “drowning in that moat every day,” Makowski says.

Providing 401(k) plans is a knowledge-intensive business that requires command of changing regulations, longstanding laws like the Employee Retirement Income Security Act of 1974 and the Pension Protection Act of 2006 as well as what’s good for the client. Makowski says that while traditional advisors build and maintain financial plans, 401(k) specialists are more focused on ensuring the fiduciary requirements of a 401(k) are being met.

“It takes such a specialist advisor that’s willing to do the blocking, tackling and all the nitty-gritty, in-the-trenches stuff,” he says. “Because if the machine breaks down, the business owner is at risk, the employee is at risk, and the advisor’s career is at risk.”

Due in part to the legal risks to advisors and the growing costs of ensuring compliance, the number of 401(k) consultants is shrinking, Makowski says. CFS continually educates staff on the latest regulatory changes while working from a checklist that also includes detailed recordkeeping, overseeing third-party administrators and communicating with trustees. 

If advisors want to be in the 401(k)-plan business, “they better be reading the 401(k) magazines, going to 401(k) conferences and generally drinking from the information fire hose from ERISA attorneys to understand what a hurdle it can be,” Makowski says. “And they need to ask themselves, ‘Is this something I’m really ready to tackle?’”

4.   Don’t Skimp on Governance or People

“If you don’t have a process, then things fall through the cracks” Makowski says.

CFS has developed a proprietary governance system that shows and regularly updates the compliance status of every account.  Of course, the processes are only as good as the people behind them. CFS has made it a point to hire young, tech-savvy people to help improve the firm’s efficiency and usher it into the modern age.

“We don’t know what we don’t know, and they know a lot of what we don’t,” says Makowski, who sees his willingness to learn from younger employees pay off in other ways. “It gets them engaged, and they love it.”

Makowski balances the new blood with experienced hires. “They all have a different view of the world,” he says. “We like our employees’ views of the world to challenge our viewpoint of the world.”

The Bottom Line

Since winning that first 401(k) client, CFS has watched its assets under management balloon to half a billion dollars in retirement plans.

Despite that success, Makowski says his motivations have never changed. He still wants to solve problems and “help average people improve their financial lives.”

Makowski, who originally planned to become a classical pianist, says running a business still requires a certain amount of creative discipline.

“Business owners are creative animals,” he says. “As long as you keep looking at the creative side, you’ll never burn out because it becomes a passion. Writers write, sculptors sculpt, painters paint, and businessmen do business.”


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