Recruiting Insurance Agents Using Self-Directed 401(k) Plans

You are an insurance company manager who has the responsibility of recruiting seasoned and newly-licensed insurance agents.    You want and need to attract quality individuals but, let’s face it, how much can you offer in the form of actual benefits, especially if we are talking about self-employed, 1099 agents?

The normal entrees showcased in the recruiting interview might include:

Insurance Product Knowledge…..check

Sales Training…..check

Sales Incentive Trips…..check


Is there a benefit you can offer a prospective agent during the recruitment process that may just be of mutual benefit to the insurance company, insurance sales manager and, most importantly, the agent?!  Could this benefit be a benefit that no other competing insurance company is offering?  Might this benefit possibly strengthen new and seasoned agent retention rates?  The answer to all….



Self-Directed IRAs and 401(k)s Assisting in Recruitment of Agents?

Probably every insurance sales manager will have sales expectations placed upon them.  These expectations go with the turf of any sales organization.  And, the recruitment of agents is a tedious process.  As a result, insurance sales managers can love and loathe this part of their job….but, make no mistake, almost all insurance managers will have the need to recruit agents. 

The introduction of  self-directed IRAs and 401(k) plans to an agent provides the agent the benefits typically associated with that of a larger employer…a retirement plan they can utilize for retirement contributions and investing.  But, pardon the saying, a self-directed IRA or 401(k) is…SUPER SIZED)!  Why?  Because the self-directed plan permits the agent a legitimate retirement plan, BUT also the ultimate freedom and flexibility with their investment options.  Does the agent want to invest into:

Stocks and mutual funds…..check

Real Estate…..check

Discounted Notes…..check

Precious Metals…..check

Life Insurance and Plethora of Other Alternative Investments…..check


For insurance sales managers, the introduction of a self-directed 401(k) or IRA plan during the recruitment of insurance agents can be of great benefit….to both the insurance sales manager and the agent for a number of reasons, inclusive of:

  1. An Extra Arrow in the Quiver — The insurance sales manager may be aligned with the best insurance company in the country, but they still must compete against other companies in the recruitment of agents.  Might introducing a self-directed SOLO 401(k) plan to the prospective agent be just one more “arrow in the quiver” when competing for the services of an insurance agent? Yes, for a number of reasons.  With this tool, the insurance sales manager demonstrates to the agent that they are concerned about their financial well being…and not just selling insurance.  A retirement plan that can benefit the agent by accepting new contributions from their self-employment commissions, rolling over funds from previously-accumulated retirement plans and, if the agent is coming into the insurance industry from corporate America, assisting them to transition (if they desire) their current retirement plans into their own SOLO 401(k) plan.
  2. Best Interests of the Agent — Insurance sales managers talk a good game about why their company is the best.  They amaze the interviewee on the educational programs to aid the agent have success in their insurance career.  By introducing the self-directed IRA or Solo 401(k), they are demonstrating that they care about the future goals and needs of the agent.   Being self-employed, the “solo” self-directed 401(k) may certainly be a retirement plan of choice for the agent.  Combine that with the fact that the individual Solo-K plan is easy to administer make this plan a serious consideration.
  3. Solo 401(k) Better Than the IRA? — In general contrast to the IRA, the 401(k) plan will provide greater benefits to the agent in that: a) the agent can make contributions to the 401(k) at a much higher level than the IRA; b) participant loans may be taken from the 401(k) and NOT the IRA; c) the  401(k) can be possibly established with minimal on-going fees vs. annual IRA fees; and, d) the 401(k) plan will not incur UDFI (Unrelated Debt Financed Income) taxes for real estate investments, where UDFI transactions within an IRA will always incur the tax.
  4. Checkbook Control or Not — This is an elective choice of the agent, but they have the ability to control their own retirement checkbook.  Why be limited to investing in traditional assets of stocks, bonds and mutual funds (only) when the agent may also want to invest into any asset (including real estate) not prohibited under IRS and DOL Prohibited Transaction regulations.  The agent acts, legally, as the Trustee of their own 401(k) plan.  As an independent agent they will have this flexibility within their plan…certainly something their W-2 counterparts will not have.   And, your financial service companies will only permit one to invest into assets they sell.
  5. Bona-Fide Agent Retirement Plan — The Solo 401(k) plans are established with IRS-approved plan documents.  No second guessing their ability to establish and operate their plan, they just need to follow the rules in operating and administering their plan.  But, make no mistake, it is their plan.   The ability, as a self-employed individual, to not only have a 401(k) plan like the “big boys” (e.g., company sponsored 401(k)), but having full control and little administrative expense and reporting.  In most cases, this freedom to invest as you see fit (again, don’t forget those IRS rules) is not something the “big boy” plans have.
  6. Can the Agent Include Their Spouse? — Yes, if the spouse is a legitimate participant in the business and the business is owned by the husband and wife.  Many agents are in business with their spouses.  When applicable, what a nice benefit to have extended to these individuals where they can both rollover and make new contribution to their Solo 401(k) plan.   In this situation, the spouse can make contributions to the plan (in compliance with IRS rules), rollover funds from other plans, and exercise loan provisions as well).  Of course, in addition to IRS regulations, you want to ensure that the business entity has been established in compliance with any applicable State regulations.
  7. Can I Only Invest in Non-Traditional Assets?   Of course not.  We establish these plans so that one can invest in stocks, bonds and mutual funds with companies that everyone has heard of.  Just think, the ability to invest in any traditional (e.g., stocks, bonds, mutual funds) and non-traditional (e.g., real estate) assets all from one account

Checkbook Control?

You probably noticed that Item #4 referenced “checkbook control”?  And you read that correctly.  An insurance agent, being self-employed, may be the Trustee of their own plan and control the retirement checkbook.  This is a benefit that, as a self-employed individual owning their own business, they may capitalize on. 

An argument can be made that the introduction of self-directed retirement plans can have a meaningful impact for both the insurance manager’s recruitment efforts and, eventual retention of these agents as well.  

The introduction of self-directed plans is simply that…an introduction.   But, it is an introduction that will only help and never hurt the recruitment efforts of an insurance sales manager.  The option for an agent to opt for this type of retirement plan will always be up to the decision of the agent, but it is a strong consideration to the career-minded agent who is also interested in possibly investing into alternative assets. 

As always, this information is provided for educational purposes.  It is not intended, nor should it be interpreted as, any form of tax, legal, financial or investment advice.  You must always consult with your respective professional in all such matters.