Not all broker dealers are created equal, especially when it comes to supporting plan advisors. Our list of broker dealers that have at least one person dedicated to the DC market has remained relatively stable, with few if any changes. This is surprising given the increased attention being paid to retirement plans and the growing interest of advisors in this market. While all firms have a bit of support, the range of services, the commitment and the number of people dedicated to the retirement plan market all vary widely.
Though 408(b)(2) did not cause the massive plan movement or complaints from participants that some had predicted, the big change is that advisors now must declare whether they are acting as a fiduciary for the services being provided. As a result, advisors that might have flown under the radar (at least with brokers dealers not savvy about ERISA) were forced to come clean if they wanted to be a named fiduciary. This forced many to leave or think about leaving if their broker dealer doesn’t allow that. There was also massive poaching in the wire house ranks, with big payoffs being offered, and some advisors going independent.
The stakes keep getting higher, with only a few BDs willing or able to invest or support what most consider a fringe market that has low margins and carries high liability. “Super groups” like Pensionmark and RBG that provide support, brand and buying power continue to grow and spawn competitors, while the larger specialty groups or original super groups prosper mightily.
Though they’re not broker dealers, trading and clearing firms like Schwab, TD Ameritrade and Fidelity are looking to entice advisors to go independent while poaching each other’s RIAs.
With the DOL’s expanded definition of fiduciary due out in the first half of 2014, many more plan advisors will be considered fiduciaries, forcing them to adopt a level compensation model. While this is troublesome to BDs that have an absolute prohibition on that model, the real issues is whether the DOL’s rules will cover IRA rollovers. That would limit commission-based advisors, affecting almost all BDs.
With revenue sharing and marketing fees under heightened scrutiny in the new world of fee disclosure, and many DC providers unwilling to pay the growing charges to get access to a BD’s advisors, many broker dealers will be questioning how much they can afford to offer plan advisors in terms of resources. This will reinforce the trend of the rich getting richer — who, in turn, will attract more of the truly focused plan advisors.
Our updated BD list is provided below. The most recent revision to the list, in November 2013, added three new specialty groups under broker dealers/distributors, indicating the growth of teams focused on corporate retirement plans:
• Pensionmark
• RBG
• Sheridan Road
For a pdf of the list, click here. And please let us know if there are any providers missing from the list, if any information is not correct or if we missed any updates.
