If you’re not looking at the not for profit (NFP) or government retirement market, you’re missing out on a significant opportunity, according to a recent Cerulli report.
Projected to grow 7% annually from 2016-2020, the total market is expected to swell to $2.4 trillion, faster than any other except for IRAs over the next five years, according to Cerulli. Health care and higher ed are the markets with the most growth, while K-12 and other multi-vendor situations offer the greatest challenges.
So what are the opportunities and challenges for advisors in these markets?
The 403(b) market is diverse and should not be looked at as a single market. It includes the health care sector, education and religious institutions, each of which may look and act differently. But as we reported recently, these groups may care more about employees than corporate plan sponsors because it is in their DNA. Realizing the growing importance of advisors, some traditional direct sold 403(b) providers are starting to reach out to select advisors to work with their clients.
The government market might be a bit trickier, as it can be more political. As we noted recently, these plan sponsors are more likely to follow detailed processes and are concerned not just about following the law but also staying out of the headlines. With significant unfunded liabilities, more and more government entities are pushing workers into participant-directed plans.
Basically, plan sponsors in the NFP and government markets have similar issues as their counterparts in the corporate world. They have limited budgets and knowledge and, while concerned about employees, they are also concerned about compliance, running the plan and costs. Perhaps it’s time to follow hockey great Wayne Gretsky’s advice: “I skate to where the puck is going to be, not where it has been.”
