As Franklin Templeton's director of defined contribution services, Dan Reinhold never thought he would find himself working at, of all things, an automobile industry conference.

But for four days last week, Reinhold attended a meeting of the National Automobile Dealers Association in New Orleans. He spent much of his time wandering through about 2,000 booths hosted by companies of all kinds.

Reinhold was there to promote a new 401(k) plan his company designed especially for auto dealers. The product, called Dealers Choice, was launched early last month.

The idea in offering the plan is to cater directly to the retirement needs of dealers, by getting to know the issues they face and the terminology they use. In doing so, Reinhold said his firm will be able to chisel a niche in the 401(k) market that will be driven, not by advertising dollars, but by word of mouth. In essence, Franklin Templeton wants to be known as the retirement plan provider of choice among auto dealers.

Win Rollovers through Referrals

"We're picking a sector and networking within that sector," Reinhold said.

Offering the plan is also part of a strategy to capitalize on a glut of asset rollovers that is expected within the next decade as baby boomers retire and move their assets out of 401(k)s. By dominating a niche market, Reinhold said Franklin Templeton is more likely to capture rollover assets within an entire industry.

"The plan is to own the source of the rollovers," he said. "If you control the source, then you stand at the head of the line to capture those rollovers."

There are about 14,000 auto dealers nationwide, Reinhold said. A quarter of them have retirement accounts of at least $1 million, which makes them the most attractive to Franklin. Reinhold hopes to pick up the business of about 750 auto dealerships within the next three years.

The San Mateo, Calif. company's approach is new to the fund business, said John Picard, a principal at the marketing firm Picard & Co. "I don't know of a lot of mutual fund companies that are targeting their distribution around industries," he said.

But Picard said that, like Franklin Templeton, more and more companies will begin segmenting their marketing efforts. He said companies are turning to one-to-one marketing, that is, finding out what their customers want by developing intimate relationships with them, then recording those preferences and customizing their services to meet those needs.

"What they've done is turned what is a strategy into a branding," he said.

Stan Bornstein, a principal at the marketing firm DiBona, Bornstein & Random, said that more fund companies need to get out from behind their desks and learn about their clients. "Any step on the part of a financial services company to put themselves in the position of the people they're ultimately selling to is a good thing," he said. "I think there are some companies that get so tangled in their own way of talking about things that they are incapable of getting into a different language."

Most typical 401(k) plans specify equal contribution limits for all participants, Reinhold said. The industry calls the scheme "straight ratio profit sharing." As a result, small companies, such as auto dealerships, which are usually made up of no more than 200 employees, often run into a situation where top executives, such as the owner and lot manager, have to stop contributing to their plans mid-year because they've maxed-out the amount they can sock away.

To remedy the problem, Franklin Templeton has designed a 401(k) for a company of about 200 people and segmented employees and their contributions by tenure and age. The plan skews the contribution limits so that top executives can contribute more to their plans instead of stopping mid-year, Reinhold said. Other employees, such as mechanics and receptionists, meanwhile, are encouraged to contribute through a communications program to ensure consistent participation in the plan across the company.

The idea, Reinhold said, is to "help the dealership put away more money than if the plan wasn't designed properly."

The firm is offering the Dealers Choice plans through broker-dealers and financial advisers and plans a series of three mailers to market the plan to those channels. "For key advisers, we will offer localized marketing support in exchange for them giving us some measure of commitment that this is a sector that they want to work locally," Reinhold said.

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