Though the DOL conflict-of-interest rule will no doubt cause headaches, those in the best position to benefit from the changes are Elite Plan Advisors, especially those who are part of a larger group. But will Elite Advisors wake up and take advantage? Can they overcome the daunting obstacles?
What are the changes?
- Move to more specialist plan advisors
- More plans offered by smaller companies
- Smaller plans moving to MEPS
- Fewer IRA rollovers
- Greater use of CITs and custom funds
- Record keeper consolidation
What are the opportunities?
- Advisors that have moved up market as their business progressed need to leverage what they have learned about plan design and investments to create “mass-customized” solutions for smaller companies.
- It’s unwieldy to manage relationships with even 10 record keepers, and many advisors work with 25 or more because of advisor-of-record wins. Advisors need to massively consolidate the providers they work with.
- Since rollovers might be more difficult and less attractive in the wake of the fiduciary regulation, more money will stay in the plan. Why not also encourage roll-ins?
- Offering custom funds not only lowers plan costs and potentially creates better multi-manager TDFs, it could offer greater revenue for advisors – fiduciary issues notwithstanding.
- There are lots of orphan plans from 401(k) and particularly 403(b) plans. Advisors with capacity stand to benefit greatly if they’re ready to give in return.
What are the obstacles?
- Can advisors adjust service models built for larger plans for the smaller plan market? Record keepers couldn’t, resulting in massive consolidation which is still occurring. Could it happen for advisors?
- Converting plans costs time and money. Will smart record keepers decide to imbed their people in large advisory groups – individuals who could evolve into specialized service reps? Talk about an unfair advantage.
- Record keepers are not sharing data, which would make roll-ins and managing money of separated employees easier. Many providers still live off proprietary investments and will be reluctant to adopt custom funds.
- Most advisors still don’t know how to manage a business.
Any suggestions?
