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Plan Advisors in the Catbird Seat

Today’s retirement plan advisors are in the proverbial catbird’s seat, with an advantage over pure benefit advisors and financial planners. How can they leverage it?

Writing in the spring issue of NAPA Net the Magazine, columnist Fred Barstein notes that as more companies adopt high-deductible health plans — shifting the costs and funding liability to participants — there’s been a noticeable shift from a focus on health care plans to a convergence of benefits, with retirement the key component.

Even advisors who have a “Pyramid Practice” — working on retirement, benefits and wealth management — see retirement as the driver of growth, Barstein notes.

Other than managing cash reserves, technically wealth managers and financial planners do not work with companies. But many focus on highly compensated executives, he writes — especially the owners of privately held companies, who are likely to cash out at some point with a large pool of assets to manage. But unless these wealth managers or financial planners also manage a company’s retirement plan, their regular access to highly compensated employees is limited.

The majority of the current group of “Elite” plan advisors (those with more than $250-$500 million in DC assets) built their DC practices on the backs of their wealth management business, says Barstein. A few came from the insurance world, putting them in a better position to understand benefits and holistic financial planning. "Some Elites eschew rollovers and wealth management," Barstein says, citing the conflicts that the pending DOL fiduciary rule is trying to eliminate.

But the vast majority of “Core” plan advisors (those with $25-$250 million) see the DC business as a way to grow wealth management. “These Core advisors are younger,” Bartein notes. “They never knew what a DB-centric world looked like. They don’t believe that Social Security will be around when they retire, leaving DC plans and IRAs as the major source of funding for retirement.”

With easy access to the mass affluent (those with investible assets of $250,000-$2.5 million) and even some high net worth investors through the company’s retirement plan, “these younger Core advisors are building their wealth management business on the backs of their retirement plan business, a complete reversal from older Elite advisors,” Barstein writes. “They get premium access to many people who will never meet another financial advisor, along with a strong endorsement from their employer.”

But to execute on a “Pyramid Practice,” Barstein writes, advisors have to either form or join a team. “It’s literally impossible for one advisor to really understand all three areas and, even if they do, who has the time to work on all three? Business owners and managers do not want to be in the benefits or retirement plan business; that’s why the idea of hiring one advisor for everything is attractive.”

The bottom line: Retirement plan advisors who have a robust wealth management and financial planning practice, deal with IRA rollovers, use technology to manage smaller accounts, and can help companies and employees with the convergence of benefits “will be in great demand, will command premium pricing, and will affect what’s really important — outcomes, not inputs,” according to Barstein.

In addition to Barstein’s regular “Inside the Marketplace” column, the spring issue of NAPA Net the Magazine includes the cover story on NAPA’s top plan advisors under 40, as well as feature articles on custom TDFs and the Obama administration’s take on open MEPs. The issue also features insights from regular contributors Jerry Bramlett, Steff Chalk, Nevin Adams, David Levine, Brian Graff, Don Trone, Joseph DeNoyior, Jania Stout, Warren Cormier and Lisa Greenwald Schneider.

To view Barstein’s column, click here and select “Plan Advisors in the Catbird Seat.” And to view a pdf of the full 56-page issue, click here.

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